This study estimates a complete demand system for rural Bangladesh, applying the Almost Ideal Demand System (AIDS) model. The estimates of demand parameters are based on primary data from the rural household survey conducted by IFPRI in 1991/92. Even though the sample may over-represent the rural poor, the estimates of income elasticity of demand suggest that rural households in general are highly responsive to changes in income in adjusting their consumption patterns. Demands for commodities are also quite responsive to changes in their own prices, with the exception of salt. The estimates of cross-price elasticities indicate that substitution effects are strong, and therefore have important implications for price policies. Disaggregated by income groups, the estimates of demand parameters of rice and wheat suggest that low-income households are more price ad income responsive than high-income households are more price and income responsive than high-income households. Differences in elasticities in absolute values between the two groups are quite striking. The estimates conform with the findings of other studies that wheat is an inferior commodity in rural Bangladesh. This attribute makes wheat a self-targeting commodity for targeted food intervention programmes. The study contends that government price intervention programmes. The study contends that government price interventions may lead to serious price repercussions in the economy. In contrast, income generating programmes and policies foster higher levels of consumption for all normal Commodities, and thus, a steady growth in production by enhancing effective demand.

Programme Impact on Current Contraception in BangladeshBy Muhammad Abdul Latif

This paper analyses the impact of three credit programmes – the Bangladesh Rural Advancement Committee (BRAC), the Bangladesh Rural Development Board’s Rural Development-12 (BRDB RD-12), and the Grameen Bank (GB), on current rate of contraception. These programmes are targeted to alleviate poverty by providing group-based credit to the rural poor in creating self employment opportunities. With small credits, these programmes combine family planning activities in terms of consciousness raising, awareness building and motivation. Sample survey data are used to analyse the problem of impact evaluation. The analyses show that the BRAC and the GB programmes have significantly positive impact on the current rate of contraception, while the BRDB RD-12 programme dues not have any such impact. It is also found that education, both of female and male separately, and child survivorship have independently position impact on current contraception. The present findings bear important implications for programmes aimed at reducing fertility.

The Dynamic of Macroeconomic Activity and Granger Temporal Causality: New Evidence from BangladeshBy Abul M.M. Masih and Rumi Masih

The primary purpose of this paper is to discern the dynamic causal chain [in the Granger (temporal) sense rather than in the structural sensel] among real output, money, interest rate, inflation and the exchange rate in the context of a small Asian developing economy, such as Bangladesh. The methodology employed uses various unit root tests and Johansen’s co-integration test followed by vector error-correction modelling, variance decompositions, and impulse response functions in order to capture both the within-sample and out-of-sample Granger causal chain among macroeconomic activity. Given the relatively inward-oriented growth strategy of this small developing economy, where the real output was vulnerable to the vicissitudes of the dominant agricultural sector prone to weather, floods and cyclones as well as the external sector including volatile foreign assistance and labour remittances from aboard, our results quite in line with our expectations, ten to suggest that in the Granger-causality sense, output was relatively the leading variable being the most exogenous of all, and all other variables including money supply, prices, exchange rate, and interest rate had to bear the brunt of adjustment endogenously in different proportions in order to accommodate that real shock. The Granger-causal chain implied by our evidence that real output more often predominantly leads (rather than lags) money supply and the other three endogenous variables, is consistent more with the recent Real Business Cycle (RBC) theory than with the other two major macroeconomic paradigms such as, the Keynesian and the Monetarist. This finding has strong policy implications for any accommodative and/or excessive monetary expansion since it is likely to be dissipated in terms of relatively higher normal variables, such as, prices or exchange rates or interest rates rather than real output for a small developing economy like Bangladesh, given a relatively unstable overall macroeconomic environment.

Non-market Work and National Income: The Case of BangladeshBy Shamim Hamid

The main objective of this paper is to develop a new system of national income accounting that better reflects women’s contribution to the national income. New methodologies are developed to decompose conventional GDP. The methods are then applied to the case of Bangladesh using nationally representative data on time allocation of men and women. The paper concludes that a more realistic estimation of GDP will be achieved only if women’s and men’s non-market work is accounted for-this methodology yields a GDP figure that is 29 per cent higher than conventional estimates, and it shows that women conventional estimates, and it shows that women contribute 41 per cent to total GDP.

Role of Targeted Credit Programmes in Promoting Employment and Productivity of the Poor in BangladeshBy Rushidan Islam Rahman and Shahidur R. Khandker

The success of credit programmes for the landless poor lies in the alleviation of poverty. The process of alleviation of poverty can be more clearly understood through an analysis of the employment that is generated with the credit and the return from activities where such employment is generated. The paper shows that the three credit programmes, (BRAC, BRDB and Grameen Bank) have been successful in expanding the opportunities of self employment. Labour force participation rates among women have increased. Participation rates and employment per worker are higher among programme participants than among target group population in the control area. The paper also indicates that, the average return to self-employment is higher than the wage rate. Thus self-employment provides a good prospect of alleviating poverty through generation of more employment which pays-off at a rate higher than the wage rate. The average returns are higher in non-agriculture compare to those in livestock and agriculture (crop production activities).The marginal productivity estimates of different types of labour shows that the marginal return to non-agriculture is the highest followed by agriculture and livestock production. However, the marginal productivity of each category of family labour, male and female, varies substantially by type of self-employment. In agriculture, the marginal productivity of female (family) labour is positive and significant, and that of male (family) labour is zero. In contrast, the marginal productivity of male (family) labour in non-agriculture is positive and significant and that of female (family) labour is zero. Further research is needed to explain why the marginal productivity of labour is zero in some activities.

The Role of Women’s Employment Programmes in Influencing Fertility Regulation in Rural BangladeshBy Simeen Mahmud

In Bangladesh the reduction of population growth through declines in marital fertility levels has long been viewed as a desirable, if not essential, development objective that is amenable to policy interventions. In particular, the provision of income earning opportunities to women was believed to have an important role in influencing individual reproductive behaviour leading to the increased and sustained use of modern contraceptives. This paper addresses the question of whether participation in employment programmes allows women to alter their fertility regulating behaviour. Using a quasi-experimental design comprising of programme participating women and a comparison group of non-participants, it seeks to identify factors related to women’s work context that are important in determining contraceptive use. The paper finds that changes in women’s work context in terms of higher returns to labour, increased access to extra-family support and greater mobility outside the home are most strongly associated with the increased use of modern contraceptives among rural women residing in intervention areas. Besides, the differential impact of the institutional approaches to input delivery on fertility regulation was also indicated.

Gender Inequality within Households : The Impact of a Women’s Development Programme in 36 Bangladeshi Villages By Sajeda Amin and Anne R. Pebley

This paper measures the impact of programme participation on a range of women’s status indicators such as control over household resources, mobility and autonomy and attitudes and aspirations. Five hundred female respondents were interviewed in 36 rural villages in two thanas of Manikganj district in 1989. Respondents were selected according to an experimental design to control for presence of NGO programme in the village, membership in BRAC Programmes and duration of membership. Qualitative information was gathered in focus group discussions and semi-structured interviews. Using multiple logistic regression to estimate the impact of group membership and programme effect, the study estimated programme impact on measures of gender inequality. It found that while programmes, after about two years, had a statistically significant impact on gender inequality within the household in terms of women’s participation in decision-making and control over resources, women’s attitudes and aspirations regarding marriage and education for their daughters is slower to change.

Empowerment of Women: Listening to the Voices of WomenBy Ruchira T. Naved

This paper focuses on how the women beneficiaries of empowerment programmes perceive interventions and what according to them are the outcomes of such interventions. Using in-depth interviews and focus group discussions this study documents women’s perceptions about the changes brought about by credit and concretization programmes.Women hold that many important and positive changes took place at individual, familial and societal levels. They feel that they have gained greater access and control over resources. Further, the relationship of women with others have improved. To a lesser extent, they have become able to change the external environment.Women are valued more in the family for their contribution in family’s income. Verbal and physical abuse and violence against women have been reduced. Women’s mobility has increased tremendously. Women have developed linkages with various service providing institutions and social organizations. Women have learned to defend their own interests through group actions. All of these have ultimately translated into better living conditions for children. Of utmost importance is the fact that women themselves highly value the changes that took place in their conditions and positions.

Dynamics of Wage Employment : A Case of Employment in the Garment IndustryBy Pratima Paul-Majumder and Salma Chaudhuri Zohir

This paper has analysed socio-economic transformation brought about in the lives of women who migrated to the cities from rural areas to take up work in the garment industry which has opened before them an unprecedented opportunities for gainful employment. In terms of socio-economic change in women’s living, the garment workers appear to have experined the most change. However, the socio-economic transformation brought about by the wage employment in the garment industry is narrowed down to a large extent by some negative implication such as exploitation in terms of low wage, irregular wage payment, job insecurity, gender discrimination in earnings etc. A regression analysis of the determinants of earning shows that the variable distinguishing the earnings of male and female is positive and significant showing that female workers earn significantly less than their male counterparts having the same education, length of service, which in turn, is found to be highly correlated with level of earning, and occupational status of the workers. Social gains attained through wage employment are also substantially curtailed by the social insecurity arising from incongenial work environment, absence of safe and secured housing facilities and lack of transport facilities. Grave concern has been expressed over the negative impact of garment factory jobs on female workers’ health. Finally, the paper suggested that implementation of labour laws and women’s education would help women to overcome many of the disadvantages they face in the labour market.

The Bangladesh Development StudiesVolume XXII, December 1994, Number 4

The Effect of Credit Liberalization on Farm Households in BangladeshBy Anwar Ahmed and John Kennedy

The aim of this paper is to analyse the impact of deregulation of rural credit on Bangladeshi farm households by size of holding. Parametric linear programming techniques are used to develop “multi-activity” household models of farms of different sizes. Farmers are assumed to be risk averse. An important model result is that the provision of credit for production, consumption and non-farm activities under a deregulated regime would significantly improve the viability of small-farm households.

Bangladesh and the Uruguay Round: A General Equilibrium Welfare AnalysisBy Helal Ahammad and Peter G. Warr

A general equilibrium approach is used in this paper to analyse the effects that the Uruguay Round of the GATT may have on economic welfare in Bangladesh. The analysis is carried out in the ‘second-best’ situation wherein some policy distortions within Bangladesh still prevail, and a methodology is innovated to decompose the direct and indirect changes in economic welfare within Bangladesh. It is concluded that the round is welfare-reducing for Bangladesh but that if Bangladesh were to reduce its own protection at the developing country average of 24 per cent, the welfare-reducing consequences of the Round would be approximately negated.

Volume 21

The Bangladesh Development StudiesVolume XXI, March 1993, Number 1

The Impact of Floods on Rural Real Wages in BangladeshBy Jean-Paul Azam

This paper analyses the impact of floods on rural real wages, and hence on the welfare of the poor, taking into account the simultaneous impact on the price of rice. This analysis is applied to the case of Bangladesh. The econometric results show that floods affect rural real wages both directly and indirectly, via the price of rice. Moreover, the direct impact is shown to be instantaneous and symmetric.

Financial Development and Income Velocity of Money in BangladeshBy M. Kabir Hassan, M. Mahmud Khan and M. Badrul Haque

This research empirically examines the determinants of income velocity of money in Bangladesh by employing a Savin-White Box-Cox parametric transformation with first-order serial autocorrelation estimation procedure.The empirical results indicate that inflation and income variables affect velocity positively. The proxy for financial development (DD/TD) affects velocity negatively, implying that the lower the proxy, the greater the level of financial development and the higher the velocity of money. Unlike other studies, this research uses an alternative proxy for financial development, which appears to provide results consistent with prior research. The development of financial institutions remains at early stage and has not yet reached the stage when velocity-financial development relationship becomes positive.The positive relationship between income and velocity has one important policy implication. As national income increases, the velocity tend to increase which allows the central bank to reduce money supply to control inflation without affecting the overall expenditure in the economy adversely.

The Bangladesh Development StudiesVolume XXI, June 1993, Number 2

Pricing Reforms and Divestiture in the Electricity Sector of BangladeshBy Shahabuddin M. Hossain

In many developing countries, electricity prices, subject to controls by public sector monopolies, are significantly distorted. This in turn gives wrong signals to investigate the desirability and induces inappropriate technology choice. This paper attempts to investigate the desirability and feasibility of price reforms and divestiture with reference to the electricity sector of Bangladesh. In particular, it discusses the analytical and empirical issues relating to estimation of shadow prices of electricity uses and analyzes the impact of price reform on government revenue and income distribution. Since, electricity generation, transmission and distribution in Bangladesh are fully controlled by a public monopoly, characterized by inefficiency in its operations and chronic financial loss, a second element of the reform examined in the paper is the divestiture and privatization of some of its operations.

The paper makes an attempt to assess the effects of economic incentives on the responsiveness of exports on the basis of a brief review of structure of incentives and export performance. The Study relates to the period 1976/77 to 1991/92 covering sixteen years for total exports and 1981/82 to 1991/92 for commodity sector due to non-availability of certain information required for the analysis. These incentives may be broadly categorised under monetary ad fiscal policy instruments. The paper demonstrates that foreign income is an important explanatory variable for export performance. for total exports, all the economic incentives such as exchange rate, relative price, export performance benefit, rate of interest, foreign income, custom duty, sales tax, excise taxes and refunds have the expected signs and are significant. The results differ significantly for different commodities. While interest rate is negatively associated with exports of raw jute, readymade garments, handicrafts and paper products. Fiscal instruments seem to be important for engineering products, paper, newsprint and paper products to influence exports. Exchange rate depreciation have a positive effect on exports of most commodities Relative price does have a role in jute goods’ exports.

Employment is supply determined in situations of full employment. In situations of underemployment, however, employment is determined by demand related factors. In such cases the labour supply function and the determinants of employment need to be analysed separately. The labour supply curve for female workers in some villages of Bangladesh was found to be horizontal (up to a point) at a given wage rate. However, the amount of employment was negatively related to wage rates because wages influenced employers’ consideration. The elasticity of employment with respect to wage rates was less than unity and thus earnings of low wage workers were lower. Some previous studies of the situation in Bangladesh and India have interpreted this negative wage employment relationship as a supply function showing negative wage elasticity. Such an interpretation is misleading and can have undesirable policy implications because there is evidence of underemployment in those study areas and in that case the relationship between wage and employment does not depict supply considerations.

The assumption of “uniform flow of internal migration” used in Rahman (1987) is generalised in this paper for cases when the flow of internal migration is increasing or even decreasing. In particular, the cases when the migration rate is proportional to the national population or to the regional population are analysed. Procedure for estimation of the migration rate and the pure migration are given. The formula for prediction of population is also provided. As an application of the procedure, migration to the Dhaka SMA is analysed with the help of Census Data.

The Bangladesh Development StudiesVolume XXI, September 1993, Number 3

Agriculture is still the single-most important sector of the Bangladesh economy. However, highly protectionist policies aimed at fostering an import-substituting manufacturing sector had adverse indirect effects on the agriculture sector. High protection to the domestic manufacturing sector permitted highly overvalued exchange rates. The result was indirect taxation of agriculture and resource outflows from the sector. The paper uses a partial equilibrium approach to compute the magnitude of the implicit taxation of agriculture and related disincentives. The transfer of resources out of agriculture due to the protectionist trade and exchange rate policies is estimated at around 20 per cent of the average agricultural value added from 1986/87-1989/90.

Constraints to Diversification in Bangladesh: A Survey of Farmers’ ViewsBy Jeffrey Metzel and Benson Ateng

The study draws upon data collected in 1994 from 200 farm household in 10 thanas, purposively selected to represent major geographic and agro-ecological zones in the Bangladesh. The paper attempts to identify problems associated with diversified crops, based on farmers’ perceptions. More importantly, farm characteristics are examined to explain levels of crop diversity or specialization; and results from regression analyses are presented. In the latter exercise, Simpson Index of diversity as well as Rice-share Index have been used. The survey results suggest several constraints to crop diversity, such as, low profitability, high input cost, risk in selling non-rice crops, susceptibility to weather variation and pests. The Simpson Index of diversity is found to decline with farm size, implying that large farmers specialize in few crops, particularly rice and few cash crops. Among other things, proximity to towns increase crop diversity while credit is found to reduce it. The study was however unable to identify any relationship between efforts by NGOs and the degree of crop diversity on farms.

Problems and Prospects of Crop Diversification in BangladeshBy Sajjad Zohir

Achieving crop diversification has often been stressed as a major policy objective. Yet, past policies in the agriculture sector had promoted rice cultivation at the expense of minor crops. While static profitability analyses indicate greater relative profitability of many non-cereal crops, risks in marketing these produce are found to be significantly high. More importantly, land characteristics are found to largely limit the expansion of area under these crops. Along with it, minor irrigation in Bangladesh is found to have favoured cereal production, making the crop economy less diversified. In order to achieve greater diversification in the crop sector, future policies need to facilitate exports, promote agro-processing industries, and emphasize on research to develop field channel designs that will facilitate simultaneous production of both cereals and non-cereals within the same command area. Along with these, large scale investments on flood control and drainage, continued support for canal re-excavation, and more rational planning of rural housing are called for to increase the size of suitable land.

The Bangladesh Development StudiesVolume XXI, December 1993, Number 4

Explaining Pakistan’s High Growth Performance Over the Past Two Decades: Can it be Sustained?By Sadiq Ahmed

Pakistan’s 6.0% p.a. growth rate over the past two decades has been considered by some as a “development puzzle” because this growth performance has been accompanied by three major disconcerting factors-high fiscal and current account deficits, relatively low savings and investment rates, and poor human capital formation. Using a standard statistical growth analysis, the paper shows that, consistent with the predictions of economic theory, the main determinants of growth have been: a rapid pace of physical capital accumulation, the positive contribution of labour force growth, greater competition from external trade, and a policy of economic liberalization since 1978. The growth impact of these traditional factors was augmented by improvements in total factor productivity resulting from greater trade and other economic liberalization that has happened in Pakistan since 1978. The sustainability of this high growth performance over the medium-to-longer term in the future is, however, doubtful. The outlook for the 1990s is that both foreign and domestic real interest rates will remain significantly positive. In this situation, if Pakistan were to continue to run fiscal deficits of the same magnitude as in the past, a financial crisis is likely to emerge pretty rapidly. Using a macroeconomic consistency framework, the paper derives estimates of sustainable current account deficits (i.e., deficits that do not worsen external creditworthingess) in the range of 3% of GDP p.a. Consistent with this and the Government’s inflation target of 5% p.a., the sustainable fiscal deficits are in the range of 4.5-5% of GDP p.a. Given the need to reduce macroeconomic imbalances, the paper also concludes that a substantial adjustment effort will be needed to raise domestic saving and investment in order to ensure the consistency of these macroeconomic targets with the growth target. Lower fiscal deficits will also help reconcile the need for greater financial resource mobilization with the objective of stimulating private investment. Finally, the paper argues that Pakistan’s ability to sustain high growth rates over the longer terms will also depend upon rapid progress with human capital development

The Money Supply Multiplier in BangladeshBy Akhtar Hossain

This paper develops a simple money multiplier model of the money supply and examines the behaviour of each of the components of the money multiplier for the period 1972 to 1993. Empirical results suggest that although the deposit-currency ratio equation is stable, the equations of the time-deposit ratio and the excess reserves-deposit ratio are unstable. Both the narrow and broad money multiplier equations are also found unstable. The paper concludes with a discussion on the implications of instability in the money multiplier for monetary policy through monetary targeting.

Human Development: Means and EndsBy Paul Streeten

This article attempts to place the UNDP’s Human Development Index in historical as well as analytical perspective by explicating its relationship with notions of “basic needs”, “opportunities”, and “functioning and capabilities”. It is pointed out that while inevitably limited and incomplete, the index has great value, in particular for showing up the inadequacies of more simple-minded indices like GNP. In discussing the reasons why human development (as defined by the HDI) is a desirable objective, a distinction is drawn between those who stress the productivity-enhancing contributions of such improvements, who are labelled the “human resource developeess”, and those (the “humanitarians”) who stress human development as an end in itself. It is pointed out that while both groups appear to have the same cause at heart, there are important differences in approach and concrete policy recommendations, e.g., the latter will put more emphasis on participation and on general as opposed to (but not exclusive of) vocational education.The article also considers the issue of an index that will capture aspects of human freedom. While such an index is assential, the article argues, it should not be incorporated into the general HDI, but should stand on its own.

Volume 20

The Bangladesh Development StudiesVolume XX, March 1992, Number 1

A Disaggregated Model for Stabilization of Rice Prices in BangladeshBy Quazi Shahabuddin

This paper builds on the earlier modelling exercise by Ahmed and Bernard (1989) for application in the rice price-stabilization procedure in Bangladesh. In fact, the paper extends the earlier model which was based on annual data to a disaggregated version based on seasonal data. Since both domestic procurement and open market sales of foodgrains, the two main instruments at the disposal of the government are essentially seasonal operations influenced by seasonal factors, a more disaggregated approach using seasonal data is considered more appropriate to estimate the quantities of grains to be procured during the harvest season and sold in the lean season to achieve the floor and ceiling price targets. Such a consistent derivation of quantity targets would not only contribute towards the preparation of a more realistic food budget but would also assist in better targeting of policy instruments for reducing both inter and intra (seasonal) year fluctuation of foodgrain prices in Bangladesh

Have the Supply Responses Increased for the Major Crops in Bangladesh?By Shamsul Alam

Supply response of the major crops have been estimated for the period 1971/72 to 1987/88 using the Nerlovian dynamic models through an Instrumental Variable Nonlinear Least Squares (IV-NLS)/Maximum Likelihood (IV-ML) method. The results are compared with the other studies and appeared the supply responses, particularly, for rice varieties and varietal types, and wheat have increased during the Bangladesh years. As the high yielding rice varieties appeared more responsive to real price changes, favourable price regimes, varietal improvement and also extended irrigation facilities would enhance more area substitution towards high yielding varieties.

Labour supply of self employed workers needs separate analysis from the labour supply of wage workers because the market wage rate may not represent an opportunity cost for the first group. This received inadequate attention as the studies on family enterprises focussed their attention on allocation of total family labour input rather than an individual worker’s labour input. Empirical studies did not properly rake into account the distinction between self employment labour supply and wage employment and/or the presence of multiple workers in the family enterprises. The present study estimated labour supply function of male and female workers engaged in family enterprises financed by the Grameen Bank of Bangladesh. It is observed that the characteristics of the family and the enterprise influence male and female labour supply functions in different directions and in varying magnitudes.

Differential Adoption of Modern Rice Technology and Labour Market Adjustments in South IndiaBy C. Ramasamy and Keijiro Otsuka

This paper is based on primary information collected through an ‘extensive survey’ (village level data obtained from knowledgeable persons) of 50 villages and ‘intensive survey’ of 600 households in five locations in Tamil Nadu State in India. It examined the impact of the adoption of high yielding varieties of rice (HYV) on labour market adjustments by looking at permanent and seasonal migration of people across study locations, and analysing the determinants of the variations in labour use and wage rates. The paper concludes that HYV adoption has significant positive effect on the use of both family and hired labour, but has no significant effect on the wage rates in any of the agricultural operations. The adoption of HYV is found positively associated with tractor rental which may have had dampened the labour using effect of the diffusion of HYVs. The paper also finds positive association between population growth rates and the adoption of HYVs, and argues that migration of people from favourable to less favourable regions tends to equalize the wage rate.

The purpose of this paper is to outline the basic policy content of adjustment programmes supported by the International Monetary Fund (IMF), and to show how these policies work in achieving macroeconomic stability, and thereby higher economic growth. Although the IMF is not a development agency, nevertheless by establishing macroeconomic equilibrium in the economy, it lays the necessary foundation of development to take place. The policies it recommends, which typically include aggregate demand policies, structural policies, exchange rate policies, and external debt policies, are all designed towards the objective of balance of payments viability, price stability, and a sustainable high growth rate that would support a steady improvement in living standards of the population. The paper reviews available empirical evidence which indicates the IMF-supported adjustment programmes have had beneficial effects in terms of reducing external and internal imbalances in a broad sample of developing countries, The paper also discusses the empirical evidence demonstrating a link between macroeconomic stability and higher long term economic growth. Therefore, it is concluded on both theoretical and empirical grounds that the adjustment policies recommended by the IMF are supportive of the basic structural and social transformations which make up the process of economic development.

Polonius Lectures Again : The World Development Report, the Washington Consensus, andHow Neoliberal Sermons Won’t Solve the Economic Problems of the Developing WorldBy Lance Taylor

This paper is a critique of recent mainstream ideas about appropriate policies for economic development, e.g. the “Washington consensus”. It begins with a review of the of the macroeconomic, fiscal, and foreign balances of typical developing economies, and then reviews the major proposals of the World Bank’s 1991 World Development Report. An important distinction between allocative and productive efficiency is drawn, and used to analyze issues of industrial and trade strategy, privatization, market deregulation, and financial reform. After a discussion of macroeconomic stabilization, the paper closes with a “non-Washington synthesis” of alternative policy views.

Trade, Trade Plicy and Economic Development in very Low-Income CountriesBy Gerry Helleiner

Analysis of the role of trade and trade policy in very low-income countries has been sparse. This paper surveys the relevant theoretical and empirical literature. It concludes that exports and trade policy are extremely important, but not the only part of development strategy. “Openness” is not the panacea that some suggest.

East and South-East Asia : Comparative Development ExperienceBy Gustav Ranis

By the 1970s, it had become clear that NIEs were emerging in East Asia, South-East Asia, and Latin America, while most of the rest of the developing world was being left behind. This paper examines the development process of four of these NIEs in Asia. Taiwan and South Korea, East Asian Systems are used as examples of states which are small, natural resource poor, and initially labour surplus and human resource rich. Thailand and the Philippines, South-East Asian countries, are used as examples of states which are medium in size, favourably endowed with natural resources and initially intermediate in labour surplus and human capital dimensions. One commonly asked question then is what are the differences in the development in these two kinds of NIEs. The principal difference lies in the move—after primary import substitution—of East Asian countries to the export of labour intensive consumer non-durables, while South-East Asian countries enter a phase of secondary import substitution and develop the domestic ability to produce consumer durables. A second commonly asked question is why this marked divergence in strategy and consequent performance between these two kinds of NIEs occurs, i.e., what are the reasons for the policy choices made, development paths followed, and the timing of different phases of development?Initial conditions are seen to have a substantial impact on the policy choices available since this affects not only initial levels of income and welfare but also the degree to which the institutional heritage is susceptible to obstructing or accommodating economic change. Colonial heritage and geographic and cultural cohesion are dimensions which have a direct bearing on the process of development. In East Asia, a confidence in national goals and an attitude of pragmatism allowed the expectation of economic attainment to be clear and permitted the government to take actions which were politically unappealing but economically sound. There were consequently less harmful price distortions and governments showed restraint in good times and flexibility in bad times. In South-East Asia, on the other hand, citizens were more concemed with competing for their rights; there was less pursuit of clear rational economic goals; and often the government would undertake a politically popular policy only to have this policy cause problems in the future. Thus, the East Asian countries can be characterized as pursuing a steady progression to economic maturity, while the South-East Asian countries can be characterized as having oscillated along a path which is less certain to achieve steady growth consistent with enhanced equity.

Structural Adjustment and Macroeconomic Performance in Bangladesh in the 1980sBy Sultan Hafeez Rahman

Beginning in the early 1980s for over a decade now, Bangladesh has been contracting structural adjustment loans from the IMF and World Bank. The loans were obtained at highly attractive terms but, were contingent upon fulfillment of stringent policy conditionalities. This study provides an assessment of macroeconomic performance during an entire decade of adjustment, i.e., the 1980s. The macroeconomic performance of Bangladesh in the 1980s has been discouraging. Though, the fiscal and external gaps showed a decline during the adjustment period, other major objectives relating to economic growth, investment, public expenditures, inflation etc. remained unfulfilled. The evidence suggests that contractionary demand management policies while, unable to restrict inflation significantly slowed down economic growth. Coupled with exchange rate depreciation, aggregate demand management policies failed to achieve real exchange rate depreciation. The expected results of the trade liberalization on the industrial sector in particular, were not observed as the sector continued to stagnate. Financial sector reforms were initiated very late in the reform process reflecting a major sequencing problem. Bangladesh’s experience with adjustment policies while raising questions about the design of standard structural adjustment packages also revels the critical importance of strong commitment to reforms and skilful economic management.

Macroeconomic Instability and Trade Performance in Brazil: Lessons from the 1980s to the 1990sBy Regis Bonelli, Gustavo B. Franco and Winston Fritsch

The objective of the paper is to evaluate, based on the experience of the 1980s, the threats posed by macroeconomic conditions to the trade liberalization process in Brazil under way since March 1990. The authors begin by reviewing Brazil’s macroeconomic and trade performance during the 1980s. The main aspects of the current trade liberalization programme are then analysed, with emphasis on the policy dilemma inherent in sustaining such a programme in a highly unstable inflationary environment. A simple macroeconomic model is constructed and used to assess these policy questions. A few economic policy recommendations close the paper. It was found that the erosion of Brazil’s traditionally large government surplus—due to rising government consumption in the second half of the 1980s, inflationary pressures and limited foreign financing—interfered with government investment programmes. These developments and a restrictive import regime led to a loss of competitiveness. Exchange rate policies are expected to play an important part in solving this dilemma—as indeed happened in 1991-92. Highest priority should be given to stabilization, but care should be taken to avoid long periods of exchange rate appreciation.

Chile replaced a highly complex and restrictive foreign trade regime by a flat 10% nominal tariff rate in a span of 5 years. In the Chilean case, the credibility of the trade reform is related more to the overall macroeconomic and policy reform itself.A trade reform generates a reallocation of resources according to comparative advantage: In the chilean case, at the intersectorial level, there was a substitution within tradables where exports of natural resources (mining, forestry, fish, fruit) displaced industry. At the intrasectorial level, there was a restructuring within industry where there was an expansion of manufacturing related to processing of (Chilean) natural resources while there was a contraction of manufacturing competing with imports.It is important to be aware of some problems that could happen during the implementation of a trade reform. From the Chilean experience the following may be mentioned (1) : Tariff reductions could generate a drop in fiscal revenues close to 1% of GDP. (2) An unilateral trade liberalization could generate an important commercial disequilibrium. Consumer (non-food) imports are highly elastic in the Chilean case income and price elasticies close to 2 and-2 have been observed. External resources required to finance Chilean import liberalization reform required 5% of GDP per year during 5 consecutive years. (3) Keeping the “right” level of the real exchange rate is the key variable to ensure the “success” of a trade reform. To achieve this objective is not easy in an inflationary environment. (4) Chilean trade reform generated a reduction of industrial employment close to 10%. (5) Export expansion is a very slow process. Some specific measures taken by the State during the 1969s in those sectors where Chile had a comparative advantage e.g. natural resources were crucial to the increase of exports in the 1970s (under a neutral incentive system).

Oil-windfalls have been more of a bane than a boon. Indonesia is a rare outlier in this list and, despite external shocks and unfavourable exchange movements, has maintained creditworthiness through swift adjustment. Moreover, despite heavy adjustment, important social gains were achieved, as reflected in a substantial reduction in the incidence of poverty. This paper sets out a framework to analyze Indonesia’s adjustment policies quantitatively. Starting with a discussion of the analytics of open-economy adjustment, in particular the interaction between the exchange rate, the interest rate, growth and debt, the implications of the open capital account for Indonesia’s adjustment are analyzed. Empirical estimates of the macroeconomic model are derived; the key parameters are the interest and exchange rate sensitivity of private consumption and investment, and the elasticity of exports and imports to the real exchange rate. The model is then used to illustrate the nature of external adjustment necessary to ensure the consistency of growth with external balance and the implications for exchange rate management. The internal adjustment that must accompany the required external adjustment, how much of it occurs in the public versus the private sector and the role of fiscal policy in effecting this adjustment is also examined.

Mexico’s Trade and Industrialization Policies in the 1980s: A Preliminary AssessmentBy Jaime Ros

As many other developing countries in Latin America and elsewhere, but perhaps faster and farther than most of them, Mexico has been moving the 1980s towards a liberalized trade regime after a long period of import substitution industrialization. Compared to other experiences, and especially to those which are also well advanced in this process such as Chile and Bolivia in Latin America, the Mexican case shows a number of singular features which, over a longer time span, will probably make it a unique case of economic and political success in terms of the smoothness of its transition, the small adjustment costs involved, the virtual absence of political tensions and resistance to change.This paper argues that—besides the critical role of non-economic factors, including geography and polities—this outcome can largely be attributed to the no less successful experience that Mexico had with import substitution industrialization and, perhaps more paradoxically, to the very adverse macroeconomic conditions under which trade reform was undertaken in the 1980s. At the same time, and for related reasons, the paper is rather skeptical about the long term benefits that the particular form adopted of trade liberalization is likely to bring.

This paper argues that Bangladesh poverty record during 1974-1984, as recently revised by S.R. Osmani and A.R. Khan, has notably positive, if not overly optimistic, aspects, which do not quite show up in their presentations. The key contentions of this paper are (a) to show that the Osmani-Khan deduction of rising poverty from the behaviour of foodgrain availability and real rice prices is logically deficient, (b) to show that contrary to their claims, real wages almost certainly did rise in the period under review, and (c) that similarly, their conclusions about the stagnation of real rice prices are based on questionable methodology.

An Econometric Analysis of Credit Constraint, Foreign Interest Rates and Currency Depreciation in the Demand for Money in BangladeshBy M. Kabir Hassan

This research empirically examines the role of credit constraint, foreign interest rates, currency depreciation, domestic inflation rate and domestic income in the demand for money in Bangladesh. This study uses post-independence quarterly data from 1974:I to 1989:IV, and employs a Savin-White (1978) econometric procedure for estimation. In addition, this study provides a battery of diagnostic tests to generate sufficient evidence on the coherence of the estimated relationships with the data. The results suggest that the economy of Bangladesh is not open, and hence foreign interest rates and currency depreciation do not play any major role in explaining the demand for money in Bangladesh. Only currency (MO) demand is significantly negatively related to domestic currency depreciation. This research also finds that in the absence of a market determined interest rate, domestic credit constraint can be used as a proxy for interest rate in money demand equation. The empirical results also suggest that the determinants are real income, lagged money stock and expected inflation.

Money, Structuralism, and the International Monetary Fund: An Auto-Regression Assessment of the ControversyBy Abdul Momen

Since the mid-nineteen fifties, two opposing schools of development thought, one known as the monetarist and the other as structuralist, have been engaged in a debate regarding the principal causes of inflation. The monetarists believe money supply is the prime cause of inflation, while the structuralists contend that inflation is a consequence of structural rigidities in developing economies and that inflation is a necessary concomitant of the major efforts launched to induce growth and development in poorer nations. In this study we have analyzed data from 1958 to 1985 for ten (10) industrial and agricultural economies to examine our hypothesis that it is the level and nature of industrialization and maturity in the financial sectors which explain divergent empirical evidence others have found in their studies. Our evidence indicates money supply is endogenous in less-developed nations while it is exogenous in the industrial economies and antecedent to inflation. In light of our findings, we suggest the IMF policy prescriptions for less-developed economies are not likely to be effective or relevant in such nations until their financial structures and levels of industrialization have improved.

The non-government Secondary Schools (NGSSs) in Bangladesh comprise more than 95 per cent of the total schools in the secondary (general) sub-sector. The study tries to relate improved availability presence of physical facilities, teachers (i.e., more educated and/or trained), financial resources and school-management (i.e., regular School Management Committee) with the performance of the NGSSs in rural Bangladesh. It is observed that the performance of the schools at the public exams is positively explained by the existence of regular School Management Committee and timely availability of salary to the teachers.

The article attempts to review systematically the evidences on investment, employment and value added in Bangladesh manufacturing sector relating to the last decade. It also presents an independent estimate of manufacturing investment and value added for 1987/88 based on enterprise level survey.It has been established that both public and private manufacturing investment and value added virtually stagnated, if not declined, in absolute and relative terms during the eighties. However, during this period employment in manufacturing sector recorded a rise. This apparently conflicting picture of stagnating investment and value added levels and rising employment scenario is partly explained by incomplete assessment of the fist two parameters, which was also indicated by the authors’ independent estimates. The evidences quite convincingly project a static picture of the ‘residual’ public sector following denationalisation measures of the early eighties. Within the private sector, the observed growth in employment is attributable mainly to the informal sector. The evidence seems suggestive of static or perhaps declining productivity levels although no firm conclusions can be drawn in this respect in view of the limitations of the data sources.

The first-generation South Asian Development Model overemphasized capital formation per se and scarcely recognized the critical role of productivity and technological change in economic development. While some rethinking has taken place in recent years, South Asian countries still do not seem to have paid productivity the attention it deserves as a source of economic development. In this paper, an attempt has been made to assess what has been happening to productivity in Bangladesh manufacturing.Using the panel data from a merge file of newly cleaned-up tapes of the Census of Manufacturing Industries (CMI), estimates of year-to-year changes in total factor productivity (TFP) in Bangladesh manufacturing industries over a period of about a dozen years have been made. The estimates are based on the growth-accounting method, as distinguished from the estimated production function method. They are done by size-class of firms at the four-digit-industry level. It is found that much less than increasing, TFP in the manufacturing industry has declined in Bangladesh. A brief look is also taken at factor intensities. The findings provide evidence suggesting correction in some of the impressions held in several quarters about the relative factor intensities and factor productivities between small and large enterprises of Bangladesh.

When policies and plans are employed to influence the structure of manufacturing industries, as is the case in Bangladesh, knowledge of the technical efficiency of firms by size is critical for formulating policies. No other econometric methodology is more suited for discerning differences in technical efficiency at the micro level, in particular as between small and large enterprises, than the translog stochastic frontier production function. In the present paper, the indicated flexible production functions are applied to 17 four-digit manufacturing industries in Bangladesh, using the firm-level panel data of the CMI Merge File. By virtue of the availability of panel data (rare for enterprises), technical efficiency.Empirical results are quite striking: Fifteen of the 30 industries (17 studied by the TL function and 13 by the CD function, the latter because of shortage of observations) experienced no significant productivity change over the 12-year period. Only 5 experienced significant acceleration in TFP change. Several suffered from deceleration. The overall picture that emerges is one of stagnation in productivity. Technical efficiency of small firms is lower than large ones. An exercise to explaining the inter-firm differences and temporal variations in technical efficiency in terms of scale of the enterprise, skill composition of the labor force, capital intensity, and material intensity failed because the explanatory power of the regressions is found very low and the explanatory variables have insignificant coefficients for most of the industries.

The concept of effective rate of assistance (ERA) employed in this study is an extension of the conventional measure of effective rate of protection (ERP). The ERP accounts only for trade assistance. The ERA treats both trade and domestic assistance. Concomitantly, in the calculation of ERAs, the assistance to both material inputs (to which the ERP has been limited) and primary inputs has been taken into account.According to the theory of policy, controllable instruments, namely statutory ERAs in the present case (as distinguished from endogenously determined realized ERAs) are to be related to the objectives of policies. A meaningful relationship between instruments and objectives can be tested essentially in a dynamic context. Accordingly, a 14-year time-series of ERAs at the four-digit industry level was prepared.The findings reveal that, paradoxically, instead of a decline in ERAs after the New Industrial Policy 1982 (NIP82), for a bulk of commodities ERAs actually increased. Possible reasons for the increase are discussed. ERAs vary a lot across industry types. The differences of ERAs as between small and large industries are insignificant (one of the main factors offsetting favorable fiscal gains to large industries being the labor code). There is little evidence to show that the highly assisted industries have reaped relative gains in expansion, scale economies, or productivity.

The effect of Labor Laws and labor Practices on Employment and Industrialization in BangladeshBy Kathryn H Anderson, Najmul Hossain and Gian S Sahota

Labor laws and industrial relations have an important bearing on industrial growth and labor welfare. While there has been much concem with fiscal and financial incentives to small and large industries in Bangladesh, very little economic analysis of the nature and consequences of labor laws and labor practices has been done. This paper addresses that issue.The paper sets up the stage by a historical survey of labor legislation in Bangladesh. From that, it selects three major areas—each an admixture of laws, institutions, and practices—for in-depth analysis from the viewpoint of their impacts on employment, wages, and industrial growth : (a) a theoretic-empirical analysis of Bangladesh’s minimum wage policy; (b) the nature and causes of industrial disputes in recent years; and (c) an empirical analysis of the country’s labor unions.Most findings are consistent with theoretical predictions. An implication is that some reform in all the three areas is due. The survey of the labor code suggests that Bangladesh has kept up with its neighboring countries in labor legislation relating to work injury, maternity benefits, and labor welfare in general, but that in the progress towards social security Bangladesh has fallen somewhat behind its sister countries of South Asia. A policy implication of the analysis of the existing minimum wage law is a possible substitution of a national, an urban, or a few regional minimum wages for the regard to industrial disputes, political factors have become a dominant cause of them. The prospects for a congenial climate of industrial relations will advance with an improvement in labor productivity and political accountability. Finally, the paper measured small negative effects of unions on the employment of skilled labor but detected no wage increases resulting from union activity. Firms may be avoiding the potentially negative employment effects of having unionized labor by substituting more contract labor for wage labor in unionized firms. Their ability to substitute in this way reduces the negative employment effects, but corrodes the effectiveness of unions.

An Assessment of the Impact of Industrial Policies in BangladeshBy Gian S Sahota

An assessment of the impact of policies on industrialization in Bangladesh has been made within the framework of the theory of policy. The analysis includes four types of comparisons: “before and after” comparisons (using the NIP82 as a landmark policy reform); “with and without” comparisons (a counterfactual approach using macro data and micro-level panel data for over a decade); comparisons of targets and achievements (based on 5-year plans); and inter-country comparisons (with relevant neighboring countries). The objective variables include output growth, employment, investment, productivity, among others.The findings reveal that industrial investment has decelerated; industrial output has stagnated; industrial productivity has fallen; and industrial sickness has increased. Technology gap against neighboring countries has widened. Inefficiencies have spread all around. Policies are, at best ineffective and, at worst, they have had negative impact on industrialization and overall national growth. One of the policy malice identified is unending and very high protection, especially through bans and tariffs instead of subsidies, which has created and is sustaining high-cost industries, leading to debilitating sickness. Denationalization without the accompanying competitive environment and a through prior analysis of the assets and liabilities, mode, extent, logistics, and a scrutiny of prospective entrepreneurs has failed to promote industrialization. Assignment of import permits and licenses of all kind on bases other than competitive entrepreneurialship of the auctioning type promoted rent-seeking and corruption, which, coupled with smuggling, inhibited industrial growth. Perpetual sustenance of depressed firms, public or private, has been inimical to industrialization. Above all, there has been neglect of technology (broadly defined), under the illusion that any talk of technology is a case for capital-intensive industrialization. A quantum increase in industrial R & D in Bangladesh is urgently needed to search for, import, and adapt similar technologies. In short, a policy implication of the findings is a redirection from over-reliance on fiscal and financial incentives to lowering real costs through technological incentives in Bangladesh.

An Industrial Strategy for Industrial Policy : Redirecting the Industrial Development of Bangladesh in the 1990sBy Rehman Sobhan

Whilst evidence on the absolute magnitude and relative share of the manufacturing sector in the economy is still indeterminate, the varieties of available data appear consistent in suggesting that in the eighties there has been little in the way of dynamic growth or structural change in the industrial sector of Bangladesh. How far has this weak industrial performance owed to inadequacies in the industrial policies?Past attempts at establishing causality as between data on performance and the prevailing policy regime has been hardly definitive for Bangladesh. The present paper discusses three central limitations of Bangladesh’s past industrial policies: (i) the absence of strategic vision in the formulation of industrial policies, (ii) prevalence of ideological predilections over pragmatic and empirical considerations specially in the matters of ownership of enterprises and (iii) the abortive attempt at promoting private industry through public credit.Drawing on the lessons from the experiences of China, India and the East Asian Newly Industrialising Countries (NICs), a redirection of Bangladesh’s industrial policy is suggested essential elements of which include (i) pursuance of rural oriented development strategy for broadening the market for domestic industry (ii) prior identification of industries to be developed to serve the domestic market and those to serve the external market (iii) building up an indigenous entrepreneurial base and investible surplus in the industrial sector through the provisions of domestic captive market and attractive profit rates in industry compared to those in intermediation and (iv) simultaneous promotion of export oriented industries through purposeful and planned intervention based on carefully studied analysis of the changing structural features and comparative advantage of the domestic economy in relation to the dynamics of global economy.

The Bangladesh Development StudiesVolume XIX, September 1991, Number 3

Revenue Effects of the VAT System in BangladeshBy Ahsan H Mansur and Bazlul Haque Khondker

This paper discusses methodologies related to three approaches to the estimation of revenue from the VAT system in Bangladesh. Starting from a heuristic approach, the authors used static Input-Output and a Computable General Equilibrium (CGE) model to determine the revenue effects of alternative VAT rates. The major conclusion is that, the VAT at the rate of 12 percent would be broadly revenue neutral and at 15 percent it would be moderately revenue augmenting.Comparison of alternative approaches indicates the superiority of CGE presentation, which projects a better disaggregated view from budgetary and accounting point of view, and a somewhat less bouyant revenue projection compared with the other two approaches. Secondary effects resulting from the response of producers and consumers to changes in the tax regime and the VAT rate and corresponding changes in relative prices, allows for a more realistic revenue estimation under the CGE approach. The paper also indicates that, by eliminating exemptions, multiplicity of tax rates and cascading effects, and by allowing for broadening of the tax base and cross checking, the VAT system, if administered properly, should lead to a much higher revenue projection than envisaged in this study based on static models.

Current Contraception among Programme BeneficiariesBy Simeen Mahmud

This paper examines the socio-demographic and female status predictors of current contraception among a group of women beneficiaries of development programmes in four rural areas of Bangladesh. Although the socio-demographic factors are found to persist as the most important determinants of contraceptive use among these women, changes in female status are also able to significantly influence contraception, and display net independent effects. These changes in female status may be linked to both direct and indirect programme inputs, the most notable impact on contraceptive use being through increased physical mobility outside the homestead. These findings bear important implications for programmes aimed at impacting on fertility levels through changes in women’s status.

At the outset, the paper examines some of the striking trends in Bangladesh exports with respect to its composition and destinations. It then analyses Bangladesh export performance by Constant Market Share (CMS) model attributable to commodity composition effect, market distribution effect, competitiveness effect and world trade effect. The paper underlines that the compared with the period 1976-81 although this could not turn the negative market effect into positive. Over the whole period 1976-87, the signs of the competitiveness effects are positive for both manufactures and agricultural products exports. The commodity composition effect due to exports of manufactures over the three periods are positive while that for the agricultural products is negative in all the periods considered. In the area of market distribution effect, the exports of agricultural products have shown relatively better performance compared with manufactured goods exports. Overall, Bangladesh exports are competitive vis-a-vis the rest of the world.

A Nutrition Model for Developing Nations with Special Reference to BangladeshBy Shams-ur-Rahman and Harry R Clarke

The article analyses the malnutrition problem in Bangladesh and examines the possibility of achieving self-sufficiency in food, where self-sufficiency is defined in terms of nutritional requirements. A linear programming model is used as the main vehicle of analysis. The decision variables are the type of crops or cropping patterns to be produced in different places of the country. The model is applied at the village level. Two villages are considered for the study. The analysis shows that working together both the villages can achieve self-sufficiency even if only the existing land areas utilized in winter and summer seasons are available for cultivation.

The Bangladesh Development StudiesVolume XIX, December 1991, Number 4

Self-selection and Earnings : A Cross Section Analysis of U.S. ImmigrantsBy M Azizur RahmanUsing data from the 1-in-100 sample of 1980 U.S. Census of Population for California and New York, this study analyzes the self-selection-corrected earnings of immigrants of three major ancestral groups- Europeans, Asians, and Hispanics-vis-a-vis their native-born counterparts in the U.S. The earnings of immigrants are overestimated if not properly corrected for their self-selectivity. All three major groups of immigrants have lower average earnings than those of their U.S. born counterparts due to immigrants’ lower returns to human capital than to lower levels of human capital. After correcting for selectivity bias, Asian immigrants have a slight advantage over European immigrants in both earnings characteristics and returns to these characteristics. Both the absolute and relative earnings of Hispanic immigrants are lower than those of Asian and European immigrants, and this differential is largely due to Hispanics’ smaller amount of human capital.

Determinants of Export Performance of BangladeshBy Dilip Kumar Roy

This study is an attempt to analyse the factors responsible for export performance involving both supply inelasticity hypothesis and demand deficiency approach of trade. The study follows some previous empirical work (Lewis 1980; Riedel 1988) in this area. World demand (developed/developing market economy’s demand) and relative export price affect export performance from the demand side while the variables like effective rate of assistance (ERA), exchange rate, non-price factor (process of learning), government policies, export diversification are considered to be supply side influences on export growth. The paper demonstrates that world demand is an important determinant of export performance. The competitiveness of Bangladesh exports in the world market may be influenced by exchange rate trade-weighted exchange rate and effective rate of assistance are found to be significantly positive. The positive and significant coefficient of dummy variable in the exchange rate indicates that devaluation has some positive effect on the export performance of Bangladesh. The coefficient of efficiency index is found to be positive in most cases. There is a strong indication of positive effect of non-price factors on export growth. Lastly, the export performance of Bangladesh has been found to be associated with greater commodity diversification of exports. Bangladesh tends to maintain its greater share of world exports when the international demand changes towards commodity composition.

A small open economy general equilibrium model for Bangladesh has been used to numerically estimate the welfare and distributional consequences of value-added tax (VAT) and excise taxes of equal yield. The results show that poorer households are adversely affected by both uniform and proportional VAT or excises because of relative shifts and the static changes took place through demand responses in consumption. One of the central findings is that it is desirable to have 2 or 3 rate structures.

Volume 18

The Bangladesh Development StudiesVolume XVIII, March 1990, Number 1

The Macroeconomics of Policy Reform : Experiments with a CGE Model of BangladeshBy Jeffrey D Lewis

At the heart of trade and industrial policy reform in developing countries are efforts to pinpoint, quantify, and then eliminate the distortions and inefficiencies that characterize tariff and tax structures. Sometimes overlooked, however, is the fact that such policy reforms have macroeconomic implications too: changes in tariff rates, for example, affect both government revenue and import demand. This paper develops a general equilibrium model of the Bangladesh economy in order to examine the macroeconomic and intersectoral consequences of proposed trade and industrial policy reforms in Bangladesh. We find that the proposed tariff reform, which would lower tariffs on industrial products to around 20-30 per cent, would result in a decline in tariff revenues, and therefore reduce total government resources, although moderate increases in excise taxes would be sufficient to recover much of the revenue lost. Replacing the current off-budget export subsidy, based on retention of foreign exchange earnings, by export subsidies financed out of the government budget would promote exports; furthermore, it would have little detrimental fiscal impact, since higher exports would yield increased corporate tax revenue, while also permitting more imports, and thus higher tariff revenues.

On cost-Benefit Analysis of Weaving by Handlooms, Powerlooms and Mills in Bangladesh, 1986/87By Nuimuddin Chowdhury

The paper estimates relative rates of return, both in financial and economic terms, among three major textile weaving techniques of Bangladesh. For tradeable inputs and for outputs. “border prices” were inferred by using observed nominal rates of protection. For nontraded inputs, plausible conversion factors were used such that, if anything, true economic rates of returns of handlooms were understated. The central result of the paper is that handlooms are economically the most efficient of any of the alternatives for weaving of virtually all fabrics types of any consequence to consequence to consumption of textiles in Bangladesh, except polyester suiting. This is the result one gets whether one uses static or dynamic cost-benefit analysis. This relativity stood up well against a sensitivity test performed with respect to nominal protection and capacity utilisation rates, as also to “high” and “low” valuation—basis for fixed capital. There is a case, therefore, for providing protection to the handloom output relative to the competing techniques, as the latter can count on lower input prices, as also have received larger public resources, than have the handlooms. The case for raising the rate of indirect taxation of powerloom sector while handlooms are exempted is made, especially since the current level of indirect taxation of the former is next to nothing. Howsoever hard this is likely to be to raise the indirect taxation of the powerloom sector, if is of great priority, because the simultaneous achievement of efficiency and equity is something that can’t be too strongly emphasised.

Foreign Capital Inflow and Economic Growth: A Two Gap Model for the Bangladesh EconomyBy S Ahmad

This paper attempts to examine the effect of foreign capital inflow on growth of output, domestic saving, imports and production structure. In doing so, a simultaneous equation model for the Bangladesh economy in the framework of the dual gap analysis has been estimated using the time series data for the period 1069/61-1979/80. It is found that foreign capital inflow was conductive for economic growth. It has substituted domestic saving as the government might have relaxed saving efforts with its inflow. It increased the productive capacity of the economy financing the development projects. It facilitated the expansion of the tertiary sector. The increased services from the tertiary sector along with increased imports of raw materials and intermediate goods (financed by it) increased output in the primary and manufacturing sectors. Thus foreign capital inflow changed the production structure of the economy with resulting changes in the composition of GDP, exports and imports.

We conduct in this study a comparative assessment of the developmental gains registered by 85 Less Developed and 19 More Developed countries (LDCs and MDCs) over the 1965-85 time period. The gains are assessed in terms of the “paired differences” statistical method applied to a number of indicators. The estimates suggest that all countries made significant gains on virtually all indicators. Yet, the gains were unevenly divided among country groups, divided on the basis of per capita income, geographical location and population size. To obtain a broad gauge of the prevailling developmental gap, we computed the number of years that would clapse before a given indicator for a given group would reach this indicator’s value registered by the group of MDCs.

Analysis of Trade Expansion Between Bangladesh and Its South Asian PartnersBy Sultan Hafeez Rahman

The trade relations between Bangladesh and 4 of its South Asian partners is modeled within a larger macroeconomic model. The macroeconomic model, including the trade functions is estimated econometrically using a single-equation simultaneous method. The results of econometric estimates are very encouraging with exceptionally good fits in most cases. The model also includes an aggregative supply side manifested in a value-added production function reflecting labour surplus in the economy. This makes the model non-Keynesian. It also specifics a non-neoclassical capital accumulation process in the economy. The model is simulated to analyze the macroeconomic effects on the Bangladesh economy, of trade expansion (increase in both exports and imports) with India, Pakistan, Nepal and Sri Lanka. The model permits the effect of imported intermediates from South Asian countries on output to be captured. This is perhaps, the most important contribution of the model. The simulation results show positive gains from increased trade. However, the instruments and institutions required to boost intra-South Asian trade are still weak and have not been addressed in this paper.

Population Birth, Death and Growth Rate in Bangladesh ; Census EstimatesBy Sharifa Begum

The present estimates of the population vital rates for various intercensal periods during 1951-81 with the help of census data and South Asian Pattern of Model Life Table suggest that the previous estimates for the same using the same data but West Model Life Table were overestimates. The present estimates suggest that the population birth and death rates during 1951-61 and 1961-74 periods were respectively 43 and 18 and 45 and 16 instead of 49 and 24 and 47 and 18 estimated earlier. The present estimates further suggest that these vital rates during 1974-81 period were 44 and 15. The population growth rates suggested by the study during 1951-61 is 25 per cent and during 1961-81 is 2.9 per cent. The present study therefore suggests that Bangladesh during the past two decades of 1960s and 1970s has experienced little demographic change.

The Bangladesh Development StudiesVolume XVIII, September. 1990, Number 3

Poverty Concepts and MeasurementBy Paul Streeten

This paper addresses some important issues relating to the concept, measurement and monitoring of poverty. Poverty measures based on income fractiles is inadequate because it fails to capture the differences in household characteristic (i.e., size of the household, children-adult distribution etc.). Income per adult equivalent can be looked upon as an ideal measure in these respects, but its use is constrained by data availability. Another problem with the income fractile measure is that income flow is less stable relative to consumption flow and the duration of one’s stay in a particular fractile and the direction of interfractile mobility are ignored. Moreover, one has to differentiate between life cycle poverty and life-long-poverty. About absolute/relative debate in the conceptualization of poverty, it is argued that although some of the inequality concerns have implications for poverty, it should not be overstretched. Rising income may, contrary to expectation, cause absolute poverty by changing the capability space or by changing the commodity space itself. A six step procedure is proposed to construct a more meaningful measure of poverty. Life expectancy as an integrating concept is endorsed as more promising than PQLI which is at best a measure of the quantity of life not its quality. A set of monitoring indicators are suggested keeping in mind the problem of data constraints. The institutional requirements of monitoring are discussed keeping both donor’s and recipients perceptions in mind and some alternative institutional mechanisms are proposed.

Poverty in Bangladesh : A Consequence of and a Constraint on GrowthBy Azizur Rahman Khan

Bangladesh agriculture experienced a reasonably rapid rate of growth during the post-independence period. Analysis of changes in real income and wages shows that such a growth had little impact on the distribution of income or alleviating poverty in the rural areas. In fact, this paper argues that in Bangladesh agriculture inequality in the distribution income, produced by the interaction among institutional, technological and demographic factors has made it impossible either to alleviate poverty or to permit sustained growth towards self-sufficiency.Unequal distribution of income limiting the internal demand for foodgrain is the critical constraint faced by Bangladesh agriculture rather than absence of appropriate technology or shortfall in required investment. Theoretically, adequate growth in internal demand for rice could be ensured under several alternative scenarios in an economy such as Bangladesh. On closer scrutiny none of them seemed feasible. On the other hand, producing crops for meeting external demand and thereby overcoming demand constraint on growth might have adverse repercussions on the incidence of rural poverty through its unfavourable effect on food prices and real wages. Under these circumstances it is argued that the burden of poverty alleviation would have to be borne either by growth in the non-agricultural sector or by directly redistributive measures in agriculture or by a combination of both.

The Challenging Arithmetic of Poverty in BangladeshBy Martin Ravallion

The paper investigates the robustness of some official estimates which show a dramatic decline in poverty in Bangladesh in the 1980s. HES data of the Bangladesh Bureau of Statistics shows a real per capita consumption growth rate of 9.9% per annum from 1981/82 to 1985/86. But, the paper estimates the growth rate of per capital real consumption to be only 0.5% per annum based on National Accounts (NA) data. The rate of growth of real consumption per capita based on HES data appears to be highly exaggerated. It true, it would be the highest rate of per capita real consumption growth for any country in the world during this period. Three alternative measures of poverty belonging to the FGT class of additively decomposable poverty measures are used in the analysis. The results show that an implied growth rate of 0.5% per year in real per capita consumption is the much more plausible estimate of the true rate. Assessments of growth during the 1980s consistent with national accounts data suggest that the proportion of poor population has remained fairly stable in recent years while absolute numbers of poor have increased. The paper shows that the growth rate of real consumption per capita has to be at least equal to the rate of population growth before the absolute number of poor can start to decline appreciably without a shift in relative inequalities. Further, measures of poverty particularly those that give more weight to the poorest of the poor, and those that use a lower poverty line would reveal greater proportionate impacts of expected economic growth in Bangladesh.

This paper seeks to analyse a remarkable change that has occurred in the structure of labour force in Rural Bangladesh and to relate this change to the recent trends in poverty. The size of non-farm labour-force has increased dramatically in the Post-independence period. Such a shift is normally associated with growing prosperity, and there are also some independent estimates which indicate that poverty may be on the decline. This paper contests the validity of these estimates of poverty, and also argues that the shift towards non-farm activities is more a sign of pathology than health in the present context of Bangladesh. The structural change merely reflects a relocation of surplus labour from the farm to the non-farm sector.

The Bangladesh Development StudiesVolume XVIII, December 1990, Number 4

Food Supply and Income Distribution in a Structuralist Macro-ModelBy Wahiduddin Mahmud

The short-run effects of changes in food availability in a low-income economy are examined by using a macro-model with two producing sectors and four household groups. The empirical analysis follows a general equilibrium approach that traces the interrelationship among prices, wages, distribution of household and factor incomes, pattern of demand, and the level of economic activity. The parameter values and the initialisation of the model are based on data on the Bangladesh economy. The results of the model demonstrate that the supply of staple foods has a strong influence on the distribution of real income and the absolute living standards of the poor. The results also suggest that the food entitlement failures in the short run arise largely due to the effect of higher food prices on real wages rather than due to direct income losses in food production.

This paper analyses the effects of timing and type of breastmilk supplementation on infant mortality using a discrete time analog of continuous time proportional hazards model. The data are taken from a prospective study which collected information on timing and type of breastmilk supplementation, mother’s nutrition at various stages of the study, and other associated factors of fertility and infant mortality.The statistical analyses show that breastfeeding type at various stages of the child’s life is a significant predictor of infant mortality, even when variables such as mother’s sex, mother’s education, religion and SES are included in the model.The study shows that infants breastfed at birth have better probabilities of survival relative to those who are never breastfed or are given liquid supplements very early in life. This effect remains significant even when mother’s nutrition at childbirth, which is used as proxy for birth weight, is controlled.

Natural Calamities, Instability in Production and Food Policy in BangladeshBy Mahabub Hossain

Bangladesh is one of the countries most seriously affected by natural disasters, being chronically prone to floods, droughts and cyclones. This paper assesses the impact of natural disasters on foodgrain production at the national and regional levels during the 1973-90 period. It also evaluates the public policy response to natural disasters. The paper argues that the effect on production has not been severe at the national level because (a) shortfalls in production in affected regions is to a large extent compensated by above normal production in non-affected regions and (b) farmers try to make up the loss through above-normal production in the post-calamity season. The paper argues that the government responds to a natural disaster by importing foodgrains more than what is needed to mitigate the adverse effects, which inflates the public stocks and depresses prices in subsequent seasons. While this has helped case the short-term food security problem, it may have dampened farmers’ incentives to sustain the growth of foodgrain production in the longrun.

Volume 17

The Bangladesh Development StudiesVolume XVII, March-June 1989, Number 1&2

This paper is about the character and consequence of the response forged by a predominantly rural industry, the handlooms, in Bangladesh, a country with massive poverty and considerable underdevelopment of public initiative, to the forces of economic liberalisation and a certain degree of investment reprioritisation favouring rural development and infrastructure. The period of special interest is the decade following 1976/77—a period, among other things, of steady economic liberalisation, exchange rate depreciation, growth of foodgrain production in excess of population growth, considerable infrastructural development. Against a background of near-total absence of public initiative, the creative response forged by the industry against the forces of competition represents a balance of the interaction between peoples’ own initiative and evolving profit opportunities. The effectiveness of the response as a whole runs substantively counter to the conventional wisdom about the situation of the handloom industry. Handloom yardage grew at a trend of 3.90% annually between 1972/73 through 1986/87—significantly in excess of the population growth. Weaving of polyester fabrics has been assimilated into the capability of the handlooms. Industry-wide loomage has grown at 2.3% during this period; loom-mix has been increasingly weighted towards the “best-practice” handlooms. Producers’ regime, as also to widespread availment of yarn trade credit that is mutually advantageous to both traders and weavers, but highly beneficial to the weavers, even small weavers. Consequently, the ratio of income retention in value added in the handloom industry has risen more recently relative to late 1970s as a result of improvement of the economic environment. The profitability of handlooms also has risen over the same period because the labour productivity has gone up. Growth of establishment has been extensively in evidence on a large sample of handloom units. Handloom industry has coped well with the competition of the imports, frequently illicit, of cotton fabrics from India. Many handloom weavers have left hand-weaving behind and graduated into capitalist rural powerloom weaving. For all its demonstrated capacity for growth and structural adjustment amid increasing economic liberalisation, the handloom industry has had its share of those bypassed. The poverty ratio on BIDS sample of handloom weaver was more than one half. The pattern of growth and structural change has therefore been dualistic. This however is not surprising due to near-total absence of public interventions. The exclusion of the smallest units from favourable change is a frustrated potential that clearly existed.

The present paper is basically a statistical exercise for estimating cloth supplies in Bangladesh during the period 1955/56-1986/87. In this paper, we have estimated the supplies of cloth by taking into account domestic production and imports. Cotton, non-cotton, and second-hand clothing, have all been covered. The data on domestic mill production, and imports of cotton, non-cotton, and of second-hand textiles are available from secondary sources. Whilst the production of the handloom sector (which currently accounts for 69% of the total cloth supply in Bangladesh), factory sub-sector, and unorganised small powerlooms have all been estimated in this paper. An attempt has also been made to assess the smuggling in/out of various textile products. It has been seen that the total supply of cloth (all types) has increased from an average of 477 million yards per year during 1955/56-1959/60 to 989 million yards during 1985/86-1986/87. Per capita availability of cloth has increased slowly over time but still remains at a very low level (around 10 yards).

The paper makes an attempt to estimate nominal and effective rates of protection being provided for various components of Bangladesh’s and spinning weaving economy. The most significant finding of the paper is that handlooms receive significantly lower effective rates of protection (ERP) than powerlooms. Also, the ERP estimates of our study for mill-made, typically relatively coarse, fabrics are found to be lower, too, than for corresponding handloom ERPs. The disadvantage of the handlooms in terms of ERP contributes an interesting factual detail in the background from which one needs to forge the development priorities of Bangladesh’s textile economy, and its weaving economy in particular.

The paper shows that following a bungled implementation of Weavers’ Credit Scheme—a public programme—the weaving industry had reverted to the old days of near-total dependence on non-institutional credit. Trade credit on yarn procurement had become the all-important source. Trade credit brings forth lucrative gains for the traders by way of interest rate mark-up. However, it permits a very fast working capital turnover, of 49 per year, and therefore a high level of capacity utilisation. High mark-up on the interest rate is due to high compounding that is scheduled into the repayments. Such surplus extraction imposes a strictly modest decline in weavers’ profits—of about 10%. The trader does not extract as much surplus as would be indicated by his share of the resources in circulation in the weavers’ business. This is due to the traders’ enlightened self-interest and the want of obvious exploitability on the part of the weavers: the poverty ratio on the study sample is over one-half. Against a background of high costs of yarn relative to the purchasing power of an average Bangladeshi consumer, the compulsion to keep cloth production in motion requires that at least moderate profits can accrue to the weaver, and that his yarn absorption, more than half of which is financed by trade credit on the study sample, is the single most significant determinant of factor productivity, while controlling for statistically significant direct effects of several other non-financial variables.

Distribution of Yarn in the Handloom Sector of Bangladesh : A Further StudyBy Abdul Hye Mondal

This paper attempts to examine the effectiveness of the distribution of yarn in the handloom sector in its historical and contemporary perspective. It finds that there is a persistent shortfall in the total availability of cotton yarn in the country in terms of quantity, quality, count and variety. This shortfall very often intensifies and converges towards crisis owing to frequent disruptions and distortions in the supply of yarn. In the face of repeated efforts made by the government institutions, market mechanism has been the prime mover of the distribution of yarn in the handloom sector. It finds that institutional mechanism instead of curbing the involvement of the middlemen traders and controlling the market forces has been virtually instrumental in paving the way for the market mechanism to be more active but inefficient. By and large, the system of yarn distribution has been historically ineffective in meeting the diverse yarn requirement of the handloom enterprises. The paper contends that there is a clear need for controlling the yarn market and emphasizes that an all-out effort be made to improve the quality of the locally produced yarns to international standard and to diversify production.

The Pricing of Cotton Yarn in the Handloom Sector of BangladeshBy Abdul Hye Mondal

This paper attempts to analyse the perpetual issue of cotton yarn pricing in the handloom sector of Bangladesh which has gained both historical and contemporary relevance. It investigates the nature of yarn price variation and examines the factors governing formation of yarn price at the level of the handloom enterprises and if the existing parttern is reasonably effective in promoting allocation of yarn conducive to the healthy growth of the handloom sector. It argues that because of several limits mainly excessive price spread across most predominant counts, the existing system of yarn pricing fails to capture and sustain dynamism of the Sector. It shows that any increase in yarn price which inherently results in increased variability of returns can cause negative supply response, and points out that the widely held ‘law of supply’ may fail when generalities of risky multi-count yarn production with risk aversion are introduced simultaneously where diversification is also affected by capacity constraints in local production and import. Contrary to popular belief, it is also found that yarn traders on the average earn only normal and sometimes even below normal profit. The paper contends that price stabilization policy support would beyond any doubt benefit the handloom enterprises at large because a stable price takes account of risk reduction benefits.

Employment and Social Issues in the Formulation of Policy for the Handloom IndustryBy Rehman Sobhan

This paper seeks to place the development of the handloom industry in a wider social context within which an appropriate set of interventions can be designed. It identifies the continuing importance of the industry in meeting the clothing needs of the country notwithstanding the growth of alternative sources of supply. It is argued that the continuing importance of the handloom industry is however not just an economic issue. The earnings of over three quarters of a million, mainly rural people, are tied-up in the fate of the industry.

Through an ongoing process of structural adjustment the handloom industry has maintained its economic competitiveness against imports and managed to remain both absolutely and at the margin the main source of cloth supply to the domestic market. This suggests that any strategy for promoting the development of the industry would satisfactorily reconcile the objectives of cost-effectively clothing the population of Bangladesh with the improvement in the incomes of a large number of relatively impoverished households.

The Bangladesh Development StudiesVolume XVII, September 1989, Number 3

It is hypothesized to examine the relationship between foreign exchange and economic development that (i) the level of economic activity in less developed countries (LDCs) is constrained, at least, in part by the foreign exchange availability, (ii) different components of foreign exchange may differ in their impacts on the imports of consumer, intermediate and capital goods and (iii) the effects of different components of foreign exchange may spread over a period of more than one year. We have tested these hypotheses estimating the relationship between the three categories of imports and two sources (exports and foreign capital inflow) of foreign exchange. It appears that the data from the Bangladesh economy covering the period 1960/61-1979/80 support these hypotheses.

Trends in the Repayment Performance in the DFPLs : Implications for the Development of Entrepreneurship in BangladeshBy Rehman Sobhan and Binayak Sen

The paper analyses the repayment trends of the two DFIs (BSB and BSRS) over the last decade which is current to 30th June, 1987. Based on data generated through a survey of 511 Industrial projects located in the private sector, the paper provides an adequate basis for evaluating the overall impact of the various policy measures (including legal actions) enacted by successive regimes to expedite the process of loan recovery. The study points to the all pervasive nature of default and proceeds to analyse further the societal implications of the default, the failure of the legal system to enforce recovery and the weaknesses of entrepreneurship. The study stressed the need for reviewing prevailing industrial policy which has failed to transform recalcitrant borrowers into a growth-seeking entrepreneurial class and suggests various remedial measures for immediate policy action.

Family, Society, Economy and Fertility in BangladeshBy M A Mannan

This paper examines the socio-economic and cultural conditions under which the large family represents a rational economic goal for parents. Here “rationality” is simply behaviour that represents a best accommodation of individual desires to the impositions of the environment. The persistence of high fertility in Bangladesh appears to be deep-rooted in the structure of society and its culture. Children are regarded as a good for which there is no substitute. The rural child provides valuable labour services to the parental household during childhood. Dependent children, specially sons, who engage in wage labour usually give their earnings to their parents. Grown children living away from the parental household usually send regular remittances to their ageing parents. They are also the most dependable source of old age security or of insurance against temporary disability or unemployment. Again, grown children contribute to the security of their families in a violent world by providing physical protection.But because of prevailing social customs, only male children work outside the home. Thus daughters cannot help in most of these activities, and to make matters worse, they cost a large amount at the time of marriage by way of dowry etc. So, for the small farmers and agricultural workers and for the vast majority of rural population, more sons mean more labour power and larger earnings. A household with a number of sons in the productive age groups, even with little access to land, can succeed economically because of larger labour supply and greater efficiency of labour through economies of scale. Perhaps, the most serious threat to a household’s economic survival arises when the head of the household dies or becomes seriously ill or permanently disabled and there are no able-bodied sons to assume responsibility for the family. This has been amply demonstrated by our ‘case studies’. Under the socio-economic and political setting prevailing in rural Bangladesh, number means safety and prosperity. Thus, children becomes a job, solace and source of social, political and economic security throughout the lives of the parents.

The Bangladesh Development StudiesVolume XVII, December 1989, Number 4

Limits to the Alleviation of Poverty Through Non-farm CreditBy S R Osmani

The Grameen Bank of Bangladesh and the IRDP (Integrated Rural Development Programme) of India have been trying for some time past to make a dent in rural poverty by extending credit for non-farm activities. While the results of IRDP have been generally disappointing, Grameen Bank has been hailed as a huge success. The efforts of Grameen Bank are, however, currently at a much lower scale compared to IRDP. So the question arises: will the Grameen Bank be able to make a substantial dent in rural poverty by extending its activities many times over? The possible limits to its success were analysed through two routes: first, we tried to see what lessons can be extracted from the experience of IRDP regarding the limitations of an expanded credit programme: secondly, we tried to discern certain limits which derive from the very logic of Grameen Bank’s approach to credit-giving. We conclude with the view that while there is still further scope for expanding its activities, the hope that Grameen Bank might prove a panacea for rural poverty is totally misplaced.

This paper attempts to provide an empirically testable conceptual apparatus which could be used to understand the process of market price determination in the yarn and textile sectors, and hence to forecast important market variables. A model of the yarn and textile sectors specifying yarn production, imports, consumption, price, cloth production, demand and price is estimated econometrically. Time series data for Bangladesh (1972/3 to 1984/5 as a whole have been used in the single equation instrumental variables estimating technique (2SLS). Though the sample size was small, the results of econometric estimation for most equations of the model were good and appeal to economic intuition.The model predicts further intensification of the structural change from cotton to non-cotton cloth which is already evident. Per capita cotton cloth demand declines from 7.20 yds. in 1985/6 to 6.25 yds. in 1994/5, while per capita non-cotton cloth consumption increases from 3.95 yds. in 1985/6 to 6.37 yds. in 1994/5. Total per capita cloth consumption increases from 11.15 yds. in 1985/6 to 12.62 yds. in 1994/5. The model also provides forecasts of other market variables mentioned above.

Theoretical efforts to understand the nature of Bengal’s agrarian transition appear to divide into two radically differing methodological discourses. In one, the point of departure is a counter-factual one revolving around a supra-historical understanding of capitalist transformation as a self-explanatory and hence unique process. The other, by contrast, departs from the issue of historical specificity the central aspect of which in Bengal’s case was the experience of British colonial rule. By drawing such a contrast, we are able to enjoin two prominent contemporary debates on the agrarian transition, namely, the debate on the mode of production in Indian agriculture and that on the creation of bourgeois property rights in Bengal. Traversing a complex methodological territory, it is argued that an adequate understanding of Bengal’s agrarian transition has of necessity to incorporate the state as an integral focus within the analysis of property relations.

Volume 16

The Bangladesh Development StudiesVolume XVI, March 1988, Number 1

Modelling the Macroeconomic Impact of AidBy Marianne T. Hill

This article develops in linear macroeconomic model of the Bangladesh economy to examine the quantitative impact of aid. The twenty-two equation, two-stage least squares model emphasized the role of aid in relieving constraints on production, which include the availability of food as well as of fertilizer, capital and other imports. Allowance is made for a possible negative effect of aid on government revenue collection efforts, as well as its positive effect on government development expenditures. The composition of aid is affected by food output. Simulation experiments are run to estimate the effect of a reduction in aid levels. It is estimated that with 95 percent confidence the cumulative impact of a halving of aid inflows over the 1960-79 period would have been a drop of between 5.9 and 11.8 percent in GDP.

Where The Poor Come Last : The Case of Modified Rationing in BangladeshBy Nuimuddin Chowdhury

This paper makes an attempt to examine the scope, character and effects of Modified Rationing (MR)—the archetype of rural rationing in Bangladesh. It probes a comprehensive range of issues in that context, including criteria defining eligibility to support under MR; foodgrain allocation modalities; comparative variability of the offtake under MR as distinct from Statutory Rationing, Other Priorities and Essential Priorities; residual character of MR; the incidence of MR with regard to foodgrain supplements entailed by it for beneficiary households; relatives scope of MR within urban as opposed to rural areas; and the leakage in MR. It is inronic that, while MR is the only monetised channel within Bangladesh’s public foodgrain distribution system having the rural poor as its de jure constituency, this has taken the deepest cutback in its scale of operation, has had the greatest volatility in offtake, has evinced a conspicuous degree of urban bias. Using sample survey results, it is shown that MR must be judged to be a very minor player in determining foodgrain intake of even poor rural households. Leakage from MR stream at the level of MR dealers is estimated at about half of what ought to have been distributed among poor beneficiary housholds.

This paper demonstrates that an employment-oriented industrialisation strategy which stresses labour-intensive sectors, can bring simultaneously both labour absorption and economic growth in a least developed country like Bangladesh. Labour-intensive industries are found to be efficient users of capital. Exports are concentrated on labour-intensive manufactured commodities in which the country has a comparative advantage and the demand for domestically produced manufactured goods is labour absorbing.

It is argued that Grameen Bank, through its credit programme, does not only raise the level of income of the rural poor, but also turn the income distribution in their favour. Also it strives to channelize the incremental income into productive off-farm investment. As a result the initial growth of income is sustained. Moreover, the credit operations make substantial impact on the standard of living via expenditures on clothing, health, nutrition, education and housing. However, there still remains an undercurrent of apprehensions of sustainability of a programme like this arising out of demand constraints. The present study indicates that most products originating from GB financed activities have high income elasticity of demand and reasonably high marginal budget shares. The results however need to be interpreted carefully considering competition from closed substitutes. Finally any policy suggestion must be based on a comprehensive review of constraints operating not only in the demand side, the supply side should also get equal importance.

The paper sets itself the task of testing the validity of the proposition that foreign aid inhibits domestic resource mobilisation and thus perpetuates the external dependence of Bangladesh. Both long run and short run analyses of the relationship between aid and domestic resource mobilisation have been carried out for the purpose. Short run aggregate analysis, done with the help of multiple regression method, reveals that aid has an overall negative effect on internal resource mobilisation. Differentiated analysis however reveals that individual components of saving behave differently, both in magnitude and direction, in relation to aid inflow. Customs duty on aided import and private monetised saving happen to be the chief contributors to the above mentioned negative impact. Short run and long run effects of aid inflow may not have the same impact for particular elements of domestic saving. A favourable movement of some of those elements, which happen to be dependence reducing in the long run, has been identified. But no conclusive remark can be made on the basis of the finding because some vital elements could not be captured in the analysis. It has been argued in the conclusion that-achievement of self reliance is a multidimensional problem, capturing economic, social and political aspects of the country.

A Review of the Macro Model for the Third Five Year PlanBy A. Parikh

The objectives of this paper are to present a summary and critique of the technical framework of the Third Five Year Plan of Bangladesh economy prepared by the economists from Netherlands using the applied general equilibrium approach. There were no explicit optimising criteria excepting that equilibrium between demand and supply was maintained at each point of time or with different simulations attempted by Dr M Keyzer. A model which can possibly permit short-run disequilibria around a long-run equilibrium (in year 2000) will be perhaps more attractive and realistic to planners and such a model can be a planning model with conflicting objectives like growth versus equity.

Effective Tax Rates for Bangladesh : 1984/85By Omar H. Chowdhury

Taxes are the most important source of internal resource generation of a poor developing country such as Bangladesh. It plays a key role in realising the twin objectives of growth and equity of the developing economies. Hence the importance of tax policy. Divergence of effective taxes from nominal or statutory tax rates may be used as an indicator of discrepancy between the objective of a tax policy and its ultimate consequence. In this paper effective tax rates for indirect taxes in Bangladesh were estimated by using an economy-wide input-output table. It was found that the nominal indirect tax rates diverge substantially from the effective tax rates on various goods and services in Bangladesh.

The Bangladesh Development StudiesVolume XVI, September 1988, Number 3

A Quarterly Short Run Money Demand Model for Bangladesh 1974:1-1985:4By Md Akhtar Hossain

This paper specifies and estimates a short run money demand model for Bangladesh for the period 1974:1-1985:4. After both formal and informal tests of model selection, the Laidler short run real money demand model has been found to be appropriate. Mckinnon, White and Davidson’s (1983) non-nested test of model selection suggests that neither the long-linear nor the linear functional form has any superiority over the other for Bangladesh. Real permanent income and the expected rate of inflation have been found to be the important variables, both theoretically and statistically, in the money demand function. The long run permanent income elasticity of the demand for money has been found to exceed unity. In the case of Bangladesh, the empirical results show that both the demand for narrow and broad money are stable functions.

Preference for Son, Desire for Additional Children and Contraceptive Use in BangladeshBy M A Mannan

The extent of son preference and its effect on desire for additional children and contraceptive use is examined for rural Bangladesh. Our results show that there is strong son preference, expressed through contraceptive behaviour and desire for additional children, on the part of rural Bangladeshi women. In deciding whether or not to have an additional birth or the use contraception, sex composition of children and number of sons are the most important determinants. Most couples are guided in their desire for additional children by an ideal sex composition which is commonly found to comprise two to three sons and one daughter. Bangladeshi women want to have children of both sexes but their preference for sons is much stronger and the number much larger compared to those for daughters. It can be argued from our findings that if the desired number of sons and daughters have already been born, women will be more likely to use contraception and less likely to want additional children.

The Relationship between the Money Supply and Prices in BangladeshBy A Parikh and C Starmer

A framework is presented for investigating bivariate causal relations using Granger’s notion of causality. This framework is employed to test the relationship between the money supply and prices in Bangladesh using monthly data for the period 1973 to 1986. The results indicate evidence of significant unidirectional feedback running from prices to money. The analysis is extended to investigate the relationship between rates of change in money and prices and once again there is evidence of feedback from prices to money. The main conclusion is that strict exogeneity of the money supply is rejected. These results are consistent with a “structuralist” view of the Bangladesh economy. Policy implications are briefly discussed.

This study examines the labour use pattern and its determinants in rural Bangladesh. Based on a year-long weekly survey of selected households in two areas in Bangladesh, the study finds, inter alia, that about half the potential labour time in the rural area remains unutilised in economic activities; a large part of the unemployed time is accounted for by females and child labour. The study examines variations in labour use over seasons by sex and by household categories. A stabilising influence of non-agricultural employment on total employment is noted. Contrary to the normal expectations, however, the new seed-fertiliser-water technology is found to cause greater fluctuations in both agricultural and non-agricultural labour use over time. A regression analysis of the determinants of total labour use shows a negative influence of both ownership and education variables on labour use. Education is however seen to be positively associated with non-agricultural labour use. The study also examines some conceptual and definitional problems in the measurement of labour force and labour time.

This beneficiaries of Statutory Rationing are an elitist lot. They have on average 15 years of urban residence behind them, four-fifths having secure jobs in coveted Governmental or other public sector. Per capita income of typical SR beneficiary household during 1984/85 was estimated (in a companion paper) as significantly in excess of the corresponding figure for the average urban household. It is not surprising that this lot is not overly protective of each and every aspect of their entitlements under SR. For example, only 59% of full ration entitlement of an average beneficiary household are utilised. While not overly protective, household’s attitude to SR foodgrains is nevertheless informed by economic discretion. This is because underutilisation is not so much due to irregular lifting as to partial lifting. SR is taken advantage of on the strength of shrewd calculation of relative prices between the ration and market regime. Between 12 and 13% of the total allotment— or somewhat over 20% of what’s lifted— is resold, presumably for gain. The hallmark of a rationing system in a poor country ought to lie in the foodstress characteristics of those aided, not in their ability to take discretionary advantage of it. For, if rationing becomes virtually an extension of the market regime, the distinction is not worth making in practice. SR should in such a case be eliminated. It is befitting, although somewhat belated, that all subsidies on SR will be eliminated by 1989.

Taxes account for more than 80 per cent of total internal resources generated in Bangladesh. Indirect taxes contribute more than 75 per cent towards total tax yield and taxes on import more than 50 per cent. The overall tax structure is in general inelastic with respect to national income. Tax effort of Bangladesh is poor compared to other selected countries of the world and is dependent on foreign assistance.

Volume 15

The Bangladesh Development StudiesVolume XV, March 1987, Number 1

Agricultural Growth Linkages—The Bangladesh CaseBy Mahabub Hossain

The benefits of agricultural growth from land based development programmes in general, are unevenly distributed, tending to by-pass the marginal farmers and the landless. In theory, the indirect benefits from growth, operating through various expenditure-inequality. First, the income and employment generated by these linkages is mainly located in the rural areas. Secondly, the kinds of non-farm goods and services induced by agricultural growth area typically produced by small labour intensive enterprises. Household surveys in Bangladesh and elsewhere confirm that the landless and small farmers earn a major portion of their income from rural non-farm sector.Given the importance of the linkages recognized in the literature, and the recent experience of moderate agricultural growth in Bangladesh this paper tries to assess the extent of such linkages in the country by analysing the pattern of consumption expenditure and the investment behaviour of different groups of rural households.

Weather, New Technology and Instability in Foodgrain Production in BangladeshBy K.A.S. Murshid

Instability in foodgrain production is generally attributed to weather variables, not an unreasonable assumption in the context of large, traditional agricultural systems. The diffusion of the new seed-fertilizer-water technology has introduced a new element to traditional agriculture. Its impact on instability to data has not been great. A higher rate of adoption and diffusion of this technology, however, is likely to generate further instability, so that it is important to recognize this potential hazard and attempt to remedy certain unresolved problems associated with it in Bangladesh, if costly adjustments are to be avoided.

Interrelationships in the Public Foodgrain DistributionSystem in Bangladesh—An Econometric AnalysisBy Quazi Shahabuddin

This paper has studied the basic interrelationships in the public foodgrain distribution system in Bangladesh. To this end, the aggregate price model developed by Raisuddin (1979) earlier was reestimated using more recent data covering the period, 1972/73 to 1983/84. This was subsequently used to analyse the impact of different production scenarios on market price of rice and also to explore how the market price of rice and foodgrain consumption are influenced by policies related to ration price, ration quota, and the share of rice in total ration distribution.The impact of a production shortfall in a “bad crop” year was observed to be quite severe as a ten per cent shortfall in foodgrain production from the “normal” level resulted in about sixteen per cent increase in price of rice (wholesale, coarse variety) in the open market. Also, it was observed that a five per cent shortfall in production would lead to about nine per cent increase in market price of rice. The empirical analysis further showed that an eight per cent reduction in ration offtake brought about through an increase in ration price by Tk. 40/md. resulted in a price increase of about 2 per cent in a “normal” crop year. Also, it was observed that a reduction in the share of rice in total ration offtake from 35% to 20% resulted in a price increase of only 2.2%. Furthermore, if rice is completely substituted by wheat in ration distribution, this policy would lead to about five per cent increase in price of rice in the open market.

Farmers’ Participation in the Paddy Markets, Their Marketed Surplus and Factors Affecting it in BangladeshBy Md. Abul Quasem

The study is based on data collected from 496 farm households covering 16 villages of Bangladesh in the year 1982. It attempts to estimate marketed surplus of paddy and identifies market participants by size of farm. It also examines the determinants of marketed surplus. The gross and net marketed surplus of paddy in the study area have been estimated to be 28 and 11 per cent of total production. The net surplus is generated by 47 per cent of total farms in the sample. The two most important factors found to affect the marketed surplus were per capita production and prices of paddy.

The paper is an attempt to describe the emerging pattern of seasonality in foodgrain prices, especially those of coarse rice, in Bangladesh in the 1979s and 1980s, as also to establish some of the more important factors which may explain the former. It is found that seasonal spreads in wholesale prices of rice and wheat have steadily declined through the 1970s and, for wheat, into the 1980’s. The compression of the seasonal spreads is found to be very conspicuously due to an elevation—to the extent of 8 to 10 percentage points—of the belly of the price curve and, to a comparatively smaller extent, due to a lowering of the seasonal peaks. Second, foodgrain procurement programme and the decentralized location of mechanized ricemilling capacity have contributed to the raising of seasonal price floor. Since at any rate wholesale prices (which we have used) and grower prices are bound to display very high degrees of correlation, it stands to reason to say that procurement programme has succeeded in raising growers prices in the small number of districts and months that are really decisive in determining the countrywide price level. In assessing the effectiveness of procurement programme one had better not use annual ratios between growers-to-procurement prices, but use monthly ratios. Computing monthly growers-to-procurement prices engenders a different view of the efficacy of the procurement programme than when annual ratios are used. Our disaggregated examination sustains the thesis that procurement programme has raised the growers-to-procurement price ratios quite conspicuously in harvest months. Hence we posit that the performance of the procurement programme explains a good deal of the elevation of the bottom of the seasonal price movement, and that therefore it sheds critical light on the causes of evolving price seasonality of foodgrains in Bangladesh. This conclusion can be made quite irrespective of whether one looks at current or trend grower-to-procurement price ratios.

The agricultural sector in Bangladesh has failed to grow at a rapid rate despite considerable emphasis that is sought to be placed on the sector. The major resources in the sector, constrained primarily by low and declining share of public expenditure on agriculture, remain utilised at sub-optimal levels. This paper examines public expenditure on agriculture highlighting its trend and composition and notes some of the major influences on the optimal use of physical resources.

This paper is concerned with adjustments to food-shortages at the micro-level, in terms of consumption, employment and demand. It argues that such effects are more serious today than e.g., in the sixties, and is not limited to the direct cultivators alone, affecting employment, income and demand in the non-food and non-agricultural sectors. It also argues that shortages result in a widening and deepening of existing seasonalities, with consumption, prices, demand, employment etc. essentially following this seasonal pattern. Apart from immediate short-run effects, substantial longer-term adjustments may be required. Implications for policy include buffer-stock operations, a rationalised public food distribution programme and development of consumption of the most disadvantaged groups, and minimising the pressure on the government budget and the balance of payments.

This study focuses on the achievement versus ascription debate that cropped up as an impact of an action research project conducted by the erstwhile National Foundation for Research on Human Resource Development (NFRHRD) during 1981-1983 with 30 urban poor women in two slum areas of Dhaka city. The purpose of the study is to assess if any change occurred in restructuring gender role as an outcome of this project, Using case-study and participant observation method it finds that the project with its overemphasis on attracting women into income generating activities has outweighed the concern for redefining women’s reproductive and domestic roles. It argues that income generating activities cannot make much headway in liberating women if it undermines the role of community mobilization and the need for reformulation of the family ideology and gender role.

A Structural Perspective of Farm and Non-farm Households in BangladeshBy Raisuddin Ahmed

The paper attempts to trace the process of growth of non-farm and transition of farm households and population with identification of those who would depend primarily on labour markets for a living. This is achieved through examination of intercensal changes. A projection is then made to portray the picture of distribution of population and households by the 2006 in categories like rural, urban, farm, non-farm, labour, and non-labour households. A particular focus of the process of disintegration of farms is included as a basis for growth of non-farm households. Some speculative implications of the projection are indicated in the concluding part of the paper.

The paper makes an attempt to glean certain salient aspects of the character of the household savings and investment process in developing country contexts. In part, also, this is concerned with identifying formulations of the determinants of household savings that are better suited to the behavioural-structural polity to be found in developing economies. In its empirical part, the paper goes on to test some models of household saving, including the Friedmanesque hypothesis relating to savings out of transitory income components. It is argued that, as would be expected, a Keynesian type relation describes the saving model of the household reasonably well, in both rural and urban areas of Bangladesh that incidentally, the use of the data from 1973/74 and 1976/77 Household Expenditure Surveys Yield quite aberrant results, and, finally, that savings out of transitory income components in rural areas of Bangladesh are consistently and significantly higher than in urban areas.

An Analysis of Seasonal Jute Price BehaviourBy Sultan Hafeez Rahman

The paper investigates the nature of price variation within the crop-year or season as opposed to price variation from year to year. The seasonal price index provides a measure of the month to month variation in jute prices. It was found that, in a typical year, the actual price peak is 36% higher than the seasonal price low. There appears to be a distinct price seasonal within the crop-year, with the low occurring in August and the high in January. The period of substantive price increase, however, takes place between August and November. To exploit the upward price gradient, three early season storage plans were examined. Though the August-November storage plan to stabilize intra-crop-year prices was found to yield the highest returns, the August-January storage plan was recommended due to its lower uncertainty.An attempt has also been made to identify theoretically and empirically, the determinants of the observed seasonal price pattern. Normally, in a crop that is harvested at one time (and consumed throughout the season) the seasonal price spread is caused by a cost of storage element and an adjustment factor due to errors in demand assessment. However, in case of jute, it was found that due to lack of adequate institutions, error in supply estimation also influences the seasonal price spread.

The paper presents a land allocation model for use in water resources planning in general, and in analysing water sector investment for agricultural development in particular. The model would serve as a tool for framework planning through screening and sequencing of alternative investment modes, and in identifying viable investment options in different regions. The paper illustrates the use of this model for analysing alternative strategies for long term development of water resources in Bangladesh. In particular, the implications of alternative investment strategies underlying different projections are analysed in terms of their contributions in achieving foodgrain demand-supply balance over the next twenty years.

The Bangladesh Development StudiesVolume XV, December 1987, Number 4

The Effect of Exchange Rate Depreciation on the Loan RepaymentPerformance of Private Enterprise in BangladeshBy Rehman Sobhan and Ahmad Ahsan

This paper analyses the contribution of exchange rate fluctuations of the Taka in contributing to the accumulation of debt overdues of private borrowers from the two DFIs of Bangladesh, BSB and BSRS. The evidence shows that with the exception of a few pre-liberation projects the overwhelming majority of borrowing enterprises have only carried a moderate exchange rate burden as a proportion of their foreign currency liabilities at the time of their repayment or as a proportion of their overdues to the DFIs. The study further establishes that there is no causal nexus between poor repayment performance of particular borrowers and their exchange rate burden. Thus the EFAS policy introduced by GOB to give some relief to defaulters is likely to have little impact on improved loan recovery by the DFIs. Finally the study provides evidence that most borrowers who did face a significant exchange rate burden could compensate themselves through enhancement of their product prices. The roots of the repayment crisis must thus be sought not in the exchange rate burden of the defaulting enterprises but in the substantive operational problems, management and market regimes of these projects.

Urban Rationing in Bangladesh in Mid-1980s: The Distribution of its BenefitsBy Nuimuddin Chowdhury

This paper first examines the income distributional impact of urban rationing in Bangladesh. It is shown that in 1973/74–a year with practically full participation in urban rationing by all eligible households–Gini coefficient of expenditure in with-rationing situation is 0.274, as compared with 0.30 in the without-rationing situation. In the main, it examines Statutory Rationing (SR)–an increasingly diminutive but still quite important element with Public Foodgrain Distribution System (PFDS)–in distributional terms. The typical household that legitimately receives foodgrain out of SR is established as a non-poor household. Rationing for the urban rich appears to serve well as the motto of SR. The poorest of households in two SR cities, viz. Dhaka and Khulna are essentially cut out from the orbit of SR. Explanation for this are to be sought in (i) the official ban on fresh issue of SR cards in SR cities after 1974, except to Government officials on transfers thereto–thereby counting out lakhs of poor households that streamed into these cities during the decade following 1974 and (ii) in that three of the SR cities, namely Dhaka, Chittagong and Khulna have been the cutting edge of proliferation of economic well-bing of middle and upper-class households since the mid-1970’s–financed mostly on public expense. An unchanged eligibility regime in SR has resulted in an overwhelming majority of urban households who had settled in these cities by 1974 being eligible beneficiaries of SR foodgrains in 1987 without deserving at all the food subsidies while millions suffered malnutrition in villages due to lack of food.

Rural deposit mobilization has been given increased emphasis in Bangladesh. This study examines the pattern and trends in Bank deposits with emphasis on rural branches. A simultaneous equations model was estimated to explain rural deposits. One equation was designed to explain district deposits and the second explained bank branches. Permanent income and inflation indirectly influence deposit through their effect on bank branches. The availability of roads and vehicles directly affects deposits through their impact on transaction costs. Inflation and literacy also affect deposit mobilization. Several suggestions are provided for a strategy for rural deposit mobilization.

Volume 14

The Bangladesh Development StudiesVolume XIV, March 1986, Number 1

Consumption Pattern in Rural BangladeshBy Nibaran Chandra Deb

Quantitative analysis of consumer behaviour is necessary for demand projections, macro-models and economic planning in general. An econometric analysis of consumer’s demand based on primary data collected from households in rural Bangladesh is attempted in this paper. Alternative hypotheses regarding demand function are tested. Effect of foreign remittances and that of the process of urbanization on the consumption pattern of the rural people of Bangladesh has also been analysed.Poverty Alleviation and the Most Disadvantaged Groups in Bangladesh AgricultureBy Atiq Rahman

The purpose of this paper is to analyse some aspects related to poverty alleviation of the most disadvantaged in an economy characterised by traditional agriculture. It focuses of certain issues of contemporary relevance and operational significance in specific Bangladesh context. The paper first examines the term “most disadvantaged” to draw its equivalence with usual poverty indicators like “nutritional deficiency”. The paper then goes on to examine some correlates of poverty and the prospects for improving the conditions of the poor. It is argued that because of the limits on alternative ways of improving the conditions of the most disadvantaged, promotion of non-farm employment is perhaps the only major way of alleviating poverty and improving the levels of living of the poorest. It is pointed out that research on non-farm employment is yet to address all the issues of relevance and that some of these need to be addressed urgently.

Growth of Fertilizer Consumption in Two Villages of Bangladesh 1977-84By Mahabub Hossain and M.A. Quasem

This article is based on data collected through two household surveys carried out during 1977/78 and 1983/84 in two villages of Bangladesh. Fertilizer consumption has increased over the 1977-84 period by about 68 per cent. All categories of farms experienced rapid growth but performance of the small farms is better in terms of use per acre of cropped land. This increase in fertilizer use is primarily a result of (i) changes in the cropping pattern from low fertilizer consuming crops to high consuming crops, (ii) increase in the proportion of crop area fertilized and (iii) rise in the number of fertilizer users. Their combined effects have more than off-set the decline in the intensity of application on HYVs, Aus and jute. During this period 1977-84, the proportion of area under HYV paddy and mustard increased substantially. Fertilizer use has also become more balanced. There is little inter-farm variation in prices except the periods of scarcity when small farms paid higher prices.

On the basis of theoretical and empirical studies one can suggest that foreign capital inflow may have either a positive or negative effect on domestic saving. Using the single equation method (SEM) Alamgir (1974) has found a positive relationship between domestic saving and foreign capital inflow in the case of Bangladesh. But his findings are different from those of the author, because using the SEM the author has obtained a significantly negative relationship between them. But the single equation estimate considers only the direct effect of foreign capital inflow on domestic saving. For this reason the author has considered the indirect effect, in addition, by using the Two-Stage Least Squares (2SLS) method. As a result of the use of the 2SLS method, the author has obtained a non-negative effect of foreign capital inflow on domestic saving in the case of Bangladesh. The non-negative effect suggests that the government of Bangladesh did not relax its saving was not substituted by foreign capital inflow. Furthermore, it does not preclude the possibility of a complementary relationship between domestic saving and foreign capital inflow.

The Bangladesh Development StudiesVolume XIV, June 1986, Number 2

The Impact of Privatisation on Entrepreneurial Development in Bangladesh AgricultureBy Md. Abul Quasem

This paper is based on the survey findings of the study “Impact of New System of Distribution of Fertilizer and Irrigation Machines in Bangladesh” conducted in 1982/83. Input entrepreneurs (fertilizer wholesalers and retailers and irrigation equipment owners) are mostly large land owners. Quite a few of them, specially fertilizer dealers, are simultaneously involved in several other commodity trades. With privatisation, the number of retailers increased, whereas wholesaling has become more concentrated. initial response of irrigation entrepreneurs in purchasing equipment is positive but their loan repayment performance is poor. Irrigation coverage by an equipment is low except STWs. Water charges by individual/group owners are found to be higher primarily because of quicker recovery of capital cost. The paper also examines the examines the investment pattern and comes to the conclusion that the existing pattern is not congenial for agricultural development.

Development of a macroeconomic forecasting model as an alternative to using structural econometric models based on shaky prior information is the objective of this article. Like structural models, it produces a system of equations which can project the future paths of economic variables using their historical data. Unlike the structural model, however, this model can be constructed based entirely on regularities in the data themselves. This model can be used to predict several periods in the future, analyse unexpacted shocks to the economy and also estimate the probability of future events.

Food policy planning in Bangladesh has consistently ignored the problem of output fluctuations, despite the fact that this has led to considerable dislocation to overall economic performance. A necessary first step therefore, is to attempt an assessment of the broad magnitudes involved, as well as their dispersion and trend. Three specific questions are investigated in this context : (a) What is the magnitude of instability and has there been a tendency for it to increase over time? (b) Are certain areas (i.e., districts) and certain crops or seasons particularly vulnerable it? (c) Is foodgrain production non-random in character?Aggregate instability levels in Bangladesh is small, with no evidence of non-randomness or increase over time. Considerable variations by crops and districts noted, localised shortages is nevertheless high. Fluctuations in one crop are also found to be correlated with another (e.g., Aus and Aman, Aman and Boro), suggesting the operation of critical variables whose impact is not limited to a particular crop alone. Some evidence of non-randomness, along with a tendency for fluctuations to increase, is also noted for Boro and Wheat (HYV). If these tendencies persist, the benefits of a strategy to raise productivity through rapid HYV diffusion may need to be viewed against the costs of adjustments to heightened instability.

Income Inequality, Poverty and Socioeconomic Development inBangladesh : An Empirical InvestigationBy Iyanatul Islam and Habibullah Khan

By analysing the data for 1863/64-1976/77, the paper attempts to study the pattern of income distribution and poverty in Bangladesh, and it also compares the socioeconomic status of the country in mid-1970s with other developing countries of Asia, Africa and Latin America. There has been a drastic deterioration in inequality and poverty in recent years, and this disturbing finding is reinforced by the fact that Bangladesh occupies the lowest position in the Third World in terms of a composite social index. The broad policy recommendation is that relatively more attention should be given to the social sectors while allocating resources for the country’s future development.

The Bangladesh Development StudiesVolume XIV, September 1986, Number 3

Development with Economic Justice and Labour EfficiencyBy Kabir U. Ahmad

This paper has argued that an industrial organization based on economic justice, democratic decision process, and productive employment of labour embodied in Labour-Efficient Firms (organized, managed and owned by workers themselves) can do a better job in producing greater amounts of output and income than the purely capitalist firms. It has also been shown that the supply response of such firms will be upward sloping in most of the cases. However, the development of such firms will lead to stiff competition with the traditional capitalist firms, and hence the society will benefit in terms of greater supply of outputs, reduced prices and greater volume of employment. A development strategy, designed especially in labour surplus economic activities through such firms, has the potentiality to achieve full employment in a shorter span of time than a purely capitalist development process may take.

The Impact of Risk on Agricultural Production Decisions : Tests of a Safety-First Model in BangladeshBy Quazi Shahabuddin and David Butterfield

The primary concern of this paper is to test whether or not risk influences the input and crop choices of small-holding farmers in developing countries. To this end efficiency conditions based on a risk neutral decision rule, expected profit maximization, are tested together with efficiency conditions based on Roy’s safety-first principle, which is based directly on considerations of risk. The tests are carried out using survey data collected in Bangladesh. The tests indicate some superiority of the safety-first rule, suggesting that considerations of risk do influence these decisions.

Projections of Consumption Expenditure over the Third Five Year Plan of Bangladesh : 1985-90By Atiq Rahman and Omar H. Chowdhury

This paper reports the findings of an exercise to project consumption expenditure over the Third Plan period of Bangladesh (1985-90) under some alternative assumptions about the growth in total expenditure and changes in income distribution. A log-normal expenditure function is used to project expenditure on specific items on the basis of calculated Engel elasticities. The use of log-normal function allows this paper to calculate a consistent set of elasticities. The exercise also lists some of the major items whose demands are likely to increase rapidly and calculates the magnitude of the increased demand.

This paper makes an attempt to evaluate private foreign investment in the industries sector of Bangladesh on the basis of data generated by a sample survey of some local and joint venture firms in late 1982. While deriving the results both ‘direct’ and ‘total’ balance of payments effects were estimated. It is found that the direct effects, which immediately affect the foreign exchanges are negative in most cases. The results, however, vastly improve with the inclusion of the indirect effects, although the net total balance of payments effects of the firms remain fairly moderate. What is clear is that there are some industrial sectors with positive while others with negative payments effects. This underscores the need for selectivity or a judicious choice of sectors where private foreign investment should be welcome.

Public Foodgrain Distribution System in Bangladesh in the Post-Liberation Period : A Historical ProfileBy Nuimuddin Chowdhury

The paper makes an attempt to profile, historically, the movements in a number of variables relating to the food economy of Bangladesh in general, and the public foodgrain distribution system (PFDS) in particular. The variables are per capita availability of rice and wheat, rationing offtake as a ratio to availability of rice and wheat, the relative roles of Statutory Rationing (SR) and Modified Rationing (MR) on the one hand, and of all other channels on the other in total offtake, rural and urban proneness of the effect of the PFDS, and finally the unit subsidy in rice and wheat distributed. It is found that, while the PFDS has markedly gained importance in the postliberation as distinct from preliberation period, per capita availability has virtually stagnated. The proportion of both SR and MR have tended to fall after the liberation, particularly rapidly for MR. PFDS expanded in 1970s in part because of the expansion of rationing effort for the civilian, military and security establishment, and in part because two mechanisms for augmenting targeted food supplies in rural areas have been introduced. One overall result has been that PFDS has been increasingly less geared toward urban beneficiaries in the 1970s and 1980s. The rural proneness of the system has betrayed a very modest tendency to improve.

The Bangladesh Development StudiesVolume XIV, December 1986, Number 4

Water Control and Agricultural Performance in BangladeshBy James K. Boyce

Starting from Ishikawa’s hypothesis that irrigation is the ‘leading input’ in Asian rice agriculture, this paper examines the role of water control in Bangladesh’s agricultural development from 1949 to 1981. Water control–the provision of the right amount of water at the right time–is here defined to encompass drainage and flood control as well as irrigation. An analysis of inter-district variations in water control, fertilizer use, and the adoption of high-yielding varieties points to strong technical complementarities among these inputs. Water control differs from other inputs in that it generally requires prior capital investment and institutional arrangements for coordinated action among many producers. The combination of input complementarity and these special attributes suggests that water control may pose the key technological constraint to agricultural growth in Bangladesh. A district-level analysis of the relationship between water control and agricultural growth, crop yields and cropping pattern further confirms the central importance of water control in Bangladesh’s agriculture.

Irrigation and Agricultural Performance in Bangladesh : Some Further ResultsBy Mahabub Hossain

This paper examines the role of irrigation in agricultural development in Bangladesh by quantifying the relationship of fertilizer consumption and adoption of HYVs with irrigation, and estimating the effect of irrigation on the intensity of land use and the growth of crop output and productivity, using the 1983/84 district level cross-section data. It supplements the work by Boyce, who conducted a similar analysis with the 1976/77 district level data estimated by the Agricultural Census. The results show a stronger relationship between irrigation and the growth of crop output and productivity than that shown by Boyce and further confirms his conclusion that irrigation poses the key technological constraint to agricultural development in Bangladesh

Supply Response in Bangladesh AgricultureBy Sultan H. Rahman

This paper presents, estimates of supply response parameters for major agricultural crops in Bangladesh. Though sufficiently large samples were not available for estimation from time series data, the importance of these estimates for agricultural policy analysis and planning makes the task worthwhile. Ordinary least squares techniques were used in each case to estimate the acreage and output supply elasticities. The rice crop has also been disaggregated into all its major components, e.g., Aman, Aus, Boro, etc. A large number of Rabi crops have also been investigated. Elasticity estimates for group commodities, e.g., foodgrain, vegetables spices, etc. have also been obtained. The ‘model’ supply functions yield good results in most cases and the estimated supply elasticities are comparable to those obtained for other developing countries.

One of the recent attempts at theorising the causes of rural poverty has pinpointed ‘urban bias’ as the villain. In this paper we try to point out the flaws of ‘urban bias’ theory as put forward by Lipton (1978). We produce evidence from Bangladesh to show that some of the propositions of Lipton’s theory do not have general empirical validity. The objective of this endeavour is to suggest that ‘urban bias’ is not the only reason of rural proverty and its removal in the ways suggested by Lipton may not provide a solution to the problem.

Institutional Changes and Relative Growth of Small and Large Scale Industriesin Bangladesh, 1947-77 : A Case Study of Cotton WeavingBy Nuimuddin Chowdhury

In presenting evidence about long-period changes in the absolute and relative levels of output of the handloom and mill-weaving sectors of the Bangladesh cotton textile industry, this paper makes an attempt to isolate some of the most important influences that conditioned the process of change over a thirty-year period. As would be expected, the level and continuity of assistance is found, in both periods, to be a critical contributory factor, though not the primum mobile, in initiating and sustaining relative growth of any particular sub-sector. It is found that in the preliberation period assistance favouring the handloom activity arising out of differential product taxation, and of liberal and interest-free trade credit, frequently from the owners of private sector mills (themselves recipients of cheap finance from term-finance and commercial banking institutions) made significant contribution to the increase in their relative size within the weaving industry. The real driving force, however, behind the framing of industrial policy and institutions remained, inter alia, the bestowal of massive financial and other assistance of the large scale textile industry, from which a fractional and largely circumstantial fall-out was provided to the mainstream of small producers in hand-weaving. The explanation of that real driving force lay in the web of social and political factors that have interacted with, sometimes over-riden, economic arguments concerning the objectives, nature and ramifications of industrial policies in the pre-liberation Bangladesh. During 1972/73-1976/77, formulation of industrial policy has again been preoccupied with large-scale industry, including an all-out effort to raise, to the greatest extent possible, the own-conversion of yarn spun by the now invariably publicly-owned textile mills. This has not only reduced the marketed surplus of yarn for handlooms but, more importantly, also reduced them to become the ultimate cushion for adjustment to unpredictable, sweeping and sometimes adverse changes involving its composition and costs. Demand conditions, as over, being not exactly helpful, the handloom industry has declined in terms of relative share.

Inflexibility of Industrial Employment in a Third World Country :The Case of Jute Spinning in BangladeshBy M. G. Kibria and C.A. Tisdell

This paper provides evidence for the existence of inflexibility of employment in the jute spinning industry of Bangladesh. Such inflexibility exists in relation to changes in manufacturing operating capacity at the plant level. Empirical support is obtained by relating the number of employed workers to the level of operating capacity in 40 jute spinning mills over a period extending to 26 years. This inflexibility has important implications for productivity progress in mills and may indicate, as suggested in this article, the existence of ‘overemployment’ (disguised unemployment) in jute mills.

Cobb-Douglas functional form has been widely used in estimating production function in traditional agriculture. However, Cobb-Douglas specification may not always represent the underlying nature of technology in different crop seasons. In this paper, the validity of the restrictions imposed by Cobb-Douglas functional form was tested vis-a-vis more general functional forms in a sample of small-holding farmers in Bangladesh. The test results showed that the Cobb-Douglas restrictions were validated against both transcendental and translog functions for aman rice, pulses, wheat, oilseeds and IRRI rice, but not in the case of aus rice and jute, the major competing crops in the Summer season. This, therefore, raises some doubts as to its ‘indiscriminate’ use in estimating disaggregated production functions in peasant agriculture. Testing of Cobb-Douglas ‘Myths’ : An Analysis with Disaggregated Functions in Bangladesh Agriculture.

This paper attempts to reformulate the Cagan inflation model in order to make it more realistic and suitable for a quantitative analysis of inflation in developing countries. The most distinctive feature of the model is that it incorporates the transmission mechanism of world inflation into the domestic economy in a regime of flexible and more realistically controlled exchange rates. A short-run aggregate supply function is specified to account for the feedback of inflation on the real economy. The monetarist flavour of the Cagan model has been maintained throughout.This modified version is tested with the annual time series data for eight developing ESCAP countries. It works relatively well for Bangladesh, Pakistan, India and Malaysia. But it performs badly for Sri Lanka, Thailand, Korea and Philippines. The major findings of the study are: the nominal money growth variable does not have a significant impact on the rate of inflation in most of the countries, whereas the real cash balances have a lagged effect on it. World inflation is one of the major determinants and the transmission of it is not only quick but more than proportionate in most of the countries. These effects are further accelerated because of their repeated devaluations. However, the increase of real income has a dampening effect on the rate of inflation in most of the countries.

Pattern of Employment in a Rural Area of Bangladesh By Barkat-e-Khuda

This paper tries to assess the extent and importance of off-farm activities in income and employment of the rural people. On the basis of information collected from a relatively developed Bangladeshi village, the paper shows that off-farm activities constitute a primary source of employment and income of about one-quarter of all households and about one-third of the labour force in the area under study. Male workers were seen to spend a higher proportion of their time on off-farm activities than agricultural activities, while for female workers off-farm activities accounted for only about one-fifth of their total working time. But, both males and females belonging to the landless households spent a higher proportion of their working time on off-farm activities than agricultural activities. Since off-farm activities are seen to be more prevalent during the agricultural slack season these can be expected to contribute to a more equitable income distribution. Based on the findings of the study the paper concludes that for a country like Bangladesh with acute unemployment and underemployment, increased efforts should be made to create off-farm employment opportunities in the rural areas for the landless and near-landless people to check increasing rural-urban migration, ensure a more balanced rural development and to positively influence the welfare of the rural population.

The paper seeks to profile the changes in the levels and structure of wages in Bangladesh’s large-scale industries in the post liberation period. It is found that real wages in large-scale industries essentially stagnated between 1972/73 and 1981/82 according to BBS data. However, real wages in public sector industries are found to have grown, albeit at positive rates. These real wage growth rates for the public sector are very modest, however. Hence, there is no evidence that we found suggesting the presence within public sector industries of a regime of labour aristocracy : while GDP per capita grew at about 1.6% during 1973/74 through 1981/82, the corresponding real wage growth rate has been well less than 1%. A second order of finding was that skill differentials rose before declining again during this period–thus suggesting an inverted-U type of pattern. All in all, skill differentials have been contracted during this period. The wage structure appears therefore to have been compressed. A positive association was noted between industry-wide capital-labour ratio and the premia paid on skills. Inter-industry differentials, too, have been compressed.

This paper formulates a linear programming model in order to determine the industrial priorities for Bangladesh in a general equilibrium framework. The model is then solved on the basis of alternative assumptions about the saving capacity, availability of foreign aid, expected growth of agricultural sector, and possibility of export expansion. An industrial priority list for Bangladesh is derived from these alternative solutions of the model. It is found that the country’s comparative advantage is greater in the agro based industries like sugar, edible oil, tobacco, jute textiles etc. Labour-intensive handloom produced cloth and leather goods also rank high in the present study. Among the capital-goods industries, the present study points to the comparative advantage in domestic production of wood goods, metal products and transport equipments. The domestic production of cotton yarn, paper, fertilizer, cement and so on is found to be less advantageous. In this connection it is pointed out that all of these industries are highly capital intensive, and in a situation of general scarcity of capital, the domestic production in these industries is very likely to prove economical.

The Bangladesh Development StudiesVolume XII, September 1984, Number 3

Economic Development and Population Policy in BangladeshBy M.R. Khan

This paper deals with the population growth rate and its policy implications for the economy of Bangladesh. Despite its obvious influence on the economy, population has never been integrated as an endogenous variable in any planning model. Development Planning is mostly supported by donor agencies which involves little micro-level planning and practically no trickle-down effect. This paper makes an effort at examining the interaction of population and other development variables in the planning process of Bangladesh. The necessity of such a study can be discerned if we look into the socio-economic scenario of rural Bangladesh, where a significant proportion of the population constitute landless farmers and share-croppers and where also the land ownership pattern contribute to low productivity. Increase in population acts as a catalyst to further pauperization of rural masses. This process is further compounded by increasing foreign aid dependence, adverse terms of trade in the international market, low savings and investment and worsening terms of trade of the rural sector. During the period spanning 1949/50 to 1969/70 real per capita GDP increased only at a rate of 1% per annum and during the period from 1969/70 to 1982/83 real growth of GDP fell behind population growth rate.Apparently there is a need for cost-benefit analysis of fertility reduction. The cost-benefit ratio of most countries vary between 1:10 to 1:30, for Bangladesh it is 1:16. Certain macro-model studies indicate that higher the intensity of fertility reduction and shorter the period of required decline, the higher will be the benefits expected in terms of gains in per capita income. There is however a contradiction between national and household interests. The latter’s decision for having more children has a negative spill over effect which nullifies the gains of the community.Apparently this is where the role of family planning programme comes in, which although operative for along time suffered serious set-back during and after the liberation of Bangladesh mainly due to administrative reasons. Under such conditions mobilization of government machinery and raising the consciousness of people is a necessity.

On Rate of Interest and Demand for Money in LDCs : The Case of BangladeshBy Mohammad Ali Taslim

The objective of this paper is to find the variables that are important in determining the demand for money in Bangladesh and the way they affect it. A large number of both theoretical and empirical exercises have been carried out for matured capitalist countries to support the monetary hypothesis that the demand for money must be related to interest rate changes. Although the institutional arrangement in which the theory was posited did not apply to most of the LDCs many authors showed the existence of inverse relationship between demand for money and interest rate in many LDCs including Bangladesh without giving any adequate theoretical justification of such a relationship. In the absence of institutional environment of the matured capitalist economy one can expect that the demand for money in LDCs would be determined primarily by transaction motive only. The empirical results presented in this paper suggest that the publics’ desired cash holdings are functionally related to the level of income, foreign aid and the price level or inflation rate. An increase in real income and inflow of foreign aid tends to increase the demand for money while an increase in the price level (or inflation rate) tends to lower it.

This paper attempts to measure and analyse the changes in the productive use of capital and labour in jute and cotton textile industries in Bangladesh especially over two distinct time periods, pre-liberation and post-liberation. The paper demonstrates that in the case of cotton textile industry the positive trend growth rate in capital productivity had outweighed the negative trend growth rate in labour productivity leading to a positive growth rate in total factor productivity over the whole period (1962-78). In the case of jute textile industry, however, the trend rate of growth for both labour and capital productivity is negative leading to a negative growth rate in total productivity over the same period. In the case of both jute and cotton textile industry capital intensity had been higher during pre-liberation period than during post-liberation period. The falling rates of capital intensity in the post-liberation period outweighed the rising capital intensity in the pre-liberation period leading to an overall negative growth rate in capital intensity. The paper concludes that productivity performance of both jute and cotton textile industry is far from satisfactory. The paper identifies and distinguishes two sets of factors influencing the factor productivity of both jute and cotton textile industry over the two time periods. It concludes with some observations relating to the policy implications of these findings.

The Bangladesh Development StudiesVolume XII, December 1984, Number 4

OPEC as a Source of Capital for the Third World : The Current PerspectiveBy Prof. Rehman Sobhan

The paper highlights the necessity of reform of the international monetary system and the consequent importance of financial cooperation amongst developing countries (FCDC). An assessment is made of the role that OPEC plays in transferring liquid assets to some developing countries following the massive build up of surplus capital due to the oil price hike in 1973/74. Fluctuations in oil prices have depleted this surplus to the extent of creating a deficit in OPEC’s external accounts, the major portion of the resources being in the hands of the advances industrial countries (AIC’s). The redeployment of this surplus to the DCs is thus likely to be constrained by OPEC’s vertcallinks with the AIC’s and their own obligations to their areas of local concern. PCDC will have to look for fresh initiatives within the third world to make any significant advances in the days ahead.

Agricultural Development in Bangladesh : A Historical PerspectiveBy Mahabub Hossain

This paper analyses the long term (1949-84) growth of Bangladesh agriculture and factors contributing to it. It shows that the secular decline in per capita agricultural production is mainly due to stagnation during the late fifties and the early seventies, caused by natural factors and disruptions owing to the war of liberation. Production grew much faster than population during the sixties and the post-1975/76 period. In the sixties the growth originated mainly from an increase in multiple cropping and improvement in cultural practices. The seed-fertilizer-water technology which was introduced in the sixties contributed only one-fourth to the growth during the decade. The traditional source of growth seem to have dried up as the new technology accounts for about two thirds of the recent (post-1975) growth. The marginal increase in croppings intensity during the recent period was also associated with the expansion of irrigation. The paper argues that there is little scope for promoting future growth by providing price incentives; the future price scenario in fact may put a negative pressure on agricultural growth. It therefore recommends that the public policy should be directed to accelerating the diffusion of new agricultural technology.

Level and Composition of Capital in Irrigated Agriculture of Bangladesh :Evidence from Tubewell Irrigated Villages of Comilla and RajshahiBy Mahmudul Alam

The present study tries to analyse how far the agrarian structural factors like tenancy and scale are related to the level and composition of capital accumulation. Two tubewell irrigated villages of two different agro-ecological areas of Bangladesh have been picked up for the study. The paper implicitly employs the Schultzian model as its analytical framework. The study broadly confirm’s the Schultzian hypothesis that tenancy acts as an obstacle to ownership of capital items.

*The Bangladesh Development StudiesVolume XI, September 1983, Number 3

The Bangladesh Development StudiesVolume XI, December 1983, Number 4

Construction of a Macroeconomic Model of the Bangladesh EconomyBy Ashok Parikh

The paper constructs a macro-econometric model of the Bangladesh economy using the Keynesian approach of price rigidity with quantity rationing. It also explicitly brings out the structure of the economy and interdependence between various sectors of the economy and, to capture the effects of monetary and fiscal stimulus on the structure of the economy, the model includes monetary and fiscal variables. One feature of the model that distinguishes it from that developed by Nurul Islam is the inclusion of the weather factor. It is an underlying idea of the model that although monetary authorities have some control over the money supply, there are powerful forces in the economy which limit the extent of this control over changes in money supply. Accordingly, the model departs from the Keynesian tradition and treats one component of money supply namely, bank lending to the private sector and government budget deficit as endogenously determined and the other component exoge- nously determined.

During the sixties overall infant mortality rate of Bangladesh was largely static. It increased considerably in the early seventies following the liberation war of 1971 and the country wide famine of 1974. Mortality differentials by residence however, reveals that unchanged mortality situation during sixties prevailed only in rural area of Bangladesh and urban mortality had been able to achieve noteworthy improvements at that time. This situation got reverses during bad years of early seventies. Urban mortality at that time as evidenced deteriorated more compared to that in rural area suggesting greater vulnerability of the urban mortality in Bangladesh during food shortages and other crises. This study found negative relationship between infant mortality and the parent’s education particularly with the mother’s education and also with the house types or housing comditions.

Adoption of HYV : Role of Availability of Inputs and the Supply Side ProblemsBy Rushidan I. Rahman

This paper discusses the role of the supply of inputs in the adoption practices of HYV. It shows that the lack of availability of inputs may pose obstacles to the adoption of HYV and expansion of its acreage. Irrigation is the most important among such supply side constraints. Supply side factors are important not only for adoption practices but also to explain the pattern of adoption among different farm sizes.

Volume 10

The Bangladesh Development Studies

Volume X, March 1982, Number 1

The Farm Wage and Land Market Situation under

Comilla Cooperative Programme

By Jasim U. Ahmed

Under the present social set-up in Bangladesh, the role of the Comilla cooperative programme in augmenting farm supply and thus bringing about prosperity to owner farmers has largely dominated over its role in promoting equity. This is reflected in the low participation of poor farmers in the programme as well as in falling real wage to farm workers and fast rising income and wealth gains to land owners due to increase in productivity, rent and price of farm land. Thus, the scope of the Comilla cooperative programme is reduced to that of other Government programmes for modernizing agriculture by strengthening the input supply system through larger private sector participation. Available data do not indicate that the process of concentration of land ownership and polarization among peasantry through land transfer is a specific phenomenon for the areas with Comilla-type cooperative programme. It is rather a concomitant feature of pauperization in Bangladesh peasantry as a whole. Appropriate Government action may be taken to correct the undemocratic functional mechanism of the Comilla cooperative programme to ensure the full-fledged participation of the poor farmers. This may be also supplemented by policies towards agricultural wage and rent reforms in order to ensure a steady growth in the income of farm workers and poor tenants in accordance with changing production possibilities.

Inflation in Bangladesh : A Reexamination of the

Structuralist – Monetarist Controversy

By Mohammad Ali Taslim

Inflation has become an endemic feature of today’s world, specially of the developing countries. Two broad schools of thought have emerged regarding the causes of inflation. The structuralists view it as a structural problem, that is, they see it essentially as the inevitable result of trying to push development strategies without making the necessary structural reforms. The monetarists, on the other hand, view inflation as a monetary phenomenon caused by inappropriate monetary and fiscal policies.

This paper attempts to analyse the inflationary process in Bangladesh in the light of the structuralist-monetarist controversy. To this end, three models of inflation are constructed and tested : a purely structuralist one, a purely monetarist one, and a hybrid model. The hybrid model performs best, suggesting that at least for Bangladesh, both sets of factors are relevant.

Official Industrial Wage Data in Bangladesh, 1972/3-1976/7

By Nuimuddin Chowdhury

This paper makes an attempt to assess the adequacy and representativeness of Bangladesh’s only published official time series data on money daily wage rates in industry with a view to interpreting the experience of her large-scale industry about the movement of real wage levels prevailing in the quinquennium 1972/3-1976/7. The desire to interpret this experience is premised on both its analytical and historical relevance to a proper inventory of facts. We argue that the above noted data, generated by the Bureau of Statistics (BBS), while it purports to estimate average wage rates in five industries, must be adjudged to be poor estimates, largely because, by improperly aggregating establishments of varying size, and covering respondents with potentially differing personal and occupational characteristics from one year to the next, the underlying sample involves a degree of misplaced aggregation. A perhaps more important conclusion we reach is that, while a knowledge of the experience of Bangladesh’s large scale industry during the quinquennium 1973-1977 is of a certain historical and analytical Interest, the BBS industrial wage data has to be adjudged an inaccurate guide with regard to the most important segment, from the point of view of that particular experience, of Bangladesh’s large scale industry, viz, the nationalized industry. Empirically, we show, that BBS data show no reflection of the very considerable increases achieved by public-sector workers in 1973/4, that since 1973/4, proportionate annual increments underlying BBS data have mostly been higher than, and extraordinarily more variable than, the matched increments for large industries, and finally that real wage levels derived from BBS data understated, despite higher annual increments, the matched levels in the nationalized industries by between 10% to 17%, depending on the industry type, between 1972/3 and 1976/7.

Agricultural Wages in Bangladesh before and after the 1974 Famine

By Martin Ravallion

Probably the most important immediate cause of starvation during the 1974 famine in Bangladesh was a sharp drop in the food purchasing power of agricultural earnings. Past work has attempted to explain this in terms of conditions in food markets. This paper reports an econometric investigation of wage movements before and after the famine which reveals a significant structural break in the short-run response of wages to prices at the time of the famine. Without this change in labour market conditions real wages would have remained fairly stable during the famine.

The Bangladesh Development Studies

Volume X, June 1982, Number 2

Measuring Social Welfare : Theory and Practice

By Omar Haider Chowdhury

This paper proposes a new index of welfare reflecting poverty that takes into account the welfare of the poor and the non-poor in the society. Sen’s analytical frame-work for real income comparisons is modified to widen the scope of welfare interpretation of different measures. Information requirement of the measure is very limited.

Bangladesh in a World of Generalised Floating

By K.M. Matin

The paper attempts to assess Bangladesh’s experience under the new regime of ‘generalised floating’. In doing so, it focuses mainly on its potential for being yet another source of instability for the economy. The paper endeavours to establish four things. First, through the computation of instability-indices, it highlights the extent of variability experienced in Taka’s bilateral exchange-rates and effective exchange-rate. Second, it appraises the qualitative and quantitative impact of this variability on important micro-economic decisions and macro-economic variables. Third it attempts to decompose instability in Taka’s effective exchange rate, into a totally external component and one ascribable to exchange-rate policy of the authorities. It is shown that the latter was successful in reducing average instability in the period of 1976-81 even if variability of bilateral exchange-rate remained high in absolute terms. Fourth, it speculates on potential policy-options and argues that under present conditions, a Taka-dollar-peg has to be the recommended policy.

Land Concentration and Dispossession in Two Villages of Bangladesh

By Atiur Rahman

The paper presents a set of dynamic data (1951-81) on the concentration and dispossession of landownership/control in two villages of Bangladesh. Based on a prolonged and in depth fieldwork, the investigation reveals that richer households have been enlarging their share on the ownership/control of agricultural land at the expense of the poorer ones. The middle peasantry was also under tremendous economic pressure. A clear process of disintegration of the peasantry is certainly on.

Factor Substitutability in the Manufacturing Industries of

Bangladesh : An Application of the Translog Cost Model

By Ali Ahmed Rushdi

The Translog cost function extimation approach has been used in this paper, to estimate important industrial policy parameters. The translog approach differs from the more frequently used techniques viz, the generalized Cobb-Dauglas production function (C0D) approach and the Constant Elasticity of Substitution (CES or ACMS) approach, in that restrictive assumptions about the elasticity of substitution between factors do not have to be made. The translog approach also has the additional advantage of providing cost shares for each factor, pair-wise elasticity of substitution, and own and cross price elasticities for the inputs. Thus, a whole range of policy parameters can be simultaneously estimated.

While estimates of elasticity of substitution between capital and labour, and capital and materials are not significantly different from one, the parameter estimate is significantly below unity for substitution between labour and materials. The cross price elasticities show that the three inputs capital, labour and materials are complements in production. The own price elasticities have the appropriate signs and are all significantly below one. As expected the cost share of raw materials is the largest (78.9%) followed by labour’s share (14.6%) and capital’s share (6.5%). Alternative hypotheses regarding scale economies have also been tested. Data from the manufacturing sector of Bangladesh for the period 1969/70 to 1978/79 have been used.

The Bangladesh Development Studies

Volume X, Setember 1982, Number 3

External Assistance and Alternative Planning Strategies :

A Two-sector Model for Bangladesh

By M. Akhlaqur Rahman and K. Mustahidur Rahman

An analytical two-sector planning model for the Bangladesh economy has been developed in this paper. The model, essentially of the two-gap vintage, is specifically geared towards analyzing policy issues with respect to external assistance. Besides providing a numerical understanding of the effects of foreign aid on domestic resource mobilization, the model also points to the critical conditions that need to be fulfilled to realize desired objectives. The results indicate that the marginal productivity of external assistance is directly proportional to the marginal rate of savings in the economy. It is possible to obtain a high degree of self-reliance by 2000/2001 by a massive increase in foreign assistance between 1981/82 and 1986/87 accompanied by significant increases in saving and investment rates and by planned re-allocation of incremental resources. The model suggests that the use of labour intensive techniques can prevent worsening of the existing distribution of income in a significant way.

Monetary Cooperation in South and South East Asia

By K.M. Matin

The paper explores the feasibility and potential of monetary cooperation among developing countries of the region. Unlike many proposals for cooperation that are expected to be underwritten by OPEC-funds, this one seeks to alleviate the problems of financing imports by mechanisms independent of such funds. It recommends the formation of a regional ‘Payments Union’ that integrates a clearing mechanism with a credit arrangement, both having certain distinctive features. The clearing facility incorporates extended settlement periods, routing of capital transactions, a new unit of account whose value is protected from gradual erosion and an investment guarantee arrangement. The latter three aspects of the facility could increase regional investment and thus overcome the usual problem of inconvertible balances. The credit mechanism derives its funds from a partial pooling of the countries’ foreign exchange reserves. The potential of the first is demonstrated in terms of its capacity to encourage regional trade and investment and thereby to finance increased imports while that of the second is shown by the generation of a eight-billion-dollar-fund capable of providing credits upto 30% of a country’s gross reserves or more. Optimism about the establishment of such an arrangement in the 1980s is predicated on three grounds. First, there will be greater incentives for even middle-income countries of the region, to seek alternative sources of financing. Second, developing countries have gained considerable experience of cooperation over the last decade. Third, this proposal seeks to extend and modify an existing facility as means of implementing this.

On Nutritional Surveillance in Bangladesh

By K. Ahmad and N. Hassan

This paper emphasized the need for nutritional surveillance activities in order to fix priorities in resource allocation as well as in meeting emergency situations. Using the already identified socio-economic indicators such as wage, price and anthropometric indices of weight and height it proposes to monitor the nutrition situation of the country. A proposed institutional framework for such activities is also outlined and the need for regional cooperation emphasized.

The Bangladesh Development Studies

Volume X, December 1982, Number 4

Econometric Modelling of Energy-Economy Interactions in Oil Importing

Developing Countries : An Empirical Test with Indian Data

By Sultan Hafeez Rahman

A model of the interdependence between energy and the macro-economy is developed and estimated. The model is kept general enough to be applicable to a vide range of oil-dependent developing economies. As a test case, the model is estimated only with Indian data. The results of econometric estimation are highly encouraging. Primary energy demand is found to be price responsive. Further, the coupling between energy use and the macro-economy comes through very clearly in the estimates. Static and dynamic simulations of the model show high degrees of reliability in the models’ ability to predict the historical behaviour of all the decision variables.

The Effect of Mother’s Work on Child Care, Dietary Intake, and

Dietary Adequacy of Pre-School Children

By Rafiqul Huda Chaudhury

In this study an attempt is made to analyze the effects of mother’s work on such aspects of child welfare as child care, dietary intake, and dietary adequacy status of pre-school children by employing data from a rural area of Bangladesh. The data show that although the mother is the major source of child care, older female children are also important. However, the quality of child care time provided by female children is not at par with that of child care provided by mothers. Time spent by the mother in child care is found to have a positive and significant effect on the calorie and protein intake and dietary adequacy status of pre-school children. However, when a mother works, her home production activities, particularly time spent in child care, are significantly reduced. The more hours per day a mother works, the less time she devotes to child care. This has a small but negative effect on the dietary intake and dietary adequacy of pre-school children. Older female children of working mothers devote significantly more time to child care than do those of non-working mothers.

Demand and Supply Position of Yarn in the Handloom Sector of

Bangladesh : A Study of Problems and Prospects

By Abdul Hye Mondal

This paper is an attempt to measure and analyse the demand for a supply of yarn in the handloom sector. It finds that there is a persistent shortfall of the supply of yarn in relation to the demand for it. It seeks to identify and examine the key factors accountable for the shortage of yarn and to explore the possibilities of overcoming the inherent problems.This paper argues that the shortage in the supply of yarn is more a function of the defective system of yarn distribution than of the total quantity of yarn, both locally produced and imported. This shortage is aggravated by the anomalies emanating from the differences in the counts of yarn. It maintains that there is a concurrent need for liberalising import of yarn until its local production attains self-sufficiency and for formulating an effective system of yarn distribution in keeping with the demand pattern of yarn. The paper concludes with some policy guidelines.

The Bangladesh Development StudiesVolume IX, Winter 1981, Number 1

Poverty and Famines in BangladeshBy M. Muqtada

The consequences of famines, manifested in the form of short-run economic fluctuations, act as a good measure of the extent of vulnerability of a low-income agrarian economy like Bangladesh. Various hypotheses have been forwarded to “explain” famines, most of these seeking causes in natural disasters, food availability decline or fluctuations in “exchange entitlements”. The present study argues that these explanations, individually considered, constitutes an inadequate basis for analysing famines, and further contends that famines must be seen as simply an extension of poverty. Analysis of famines must therefore essentially emanate from various poverty-themes and the structure of the economy to which these themes may relate. The study attempts to make a prima facie case for the above approach, drwing largely from the experience of the 1974/75 famine of Bangladesh.

Current official policy in the industrial sector is directed towards building up private entrepreneurship through fiscal concessions, liberal provision of public resources and disinvestment of particular nationalised enterprises. In these circumstances it is essential to appraise the efficacy with which the private entrepreneurs have thus far handled public resources. This paper examines one aspect of this performance, the repayment of loans to public financial institutions (BSB and BSRS) by the private entrepreneurs. The results indicate that the loan repayment performance of private enterprises to both BSB and BSRS has been poor, with considerable accumulation of overdues in payment liability and its growth over time. This accumulation and build up of overdues is pervasive amongst all enterprises. Poor repayment performance does not differentiate between the size of enterprises, its location or the entrepreneurial class as a whole. Given the widespread nature of the default it is essential to seek a fuller understanding of the circumstances contributing to the poor repayment performance of private entrepreneurs in Bangladesh. This will provide the basis for a review of the validity and efficacy of the policy of channelling public resources and denationalisation of enterprises into private hands.

Implications of Seasonality of Rural Labour Use Pattern :Evidences from Two Villages in BangladeshBy Rushidan Islam Rahman

Labour use in agriculture is highly seasonal. The nature and implications of such seasonality are explored in this paper at a micro level using data from two villages in Bangladesh. It is found that rural unemployment due to seasonal factors is much greater than non-seasonal unemployment. As a result, poverty and food shortage is very much a seasonal phenomenon. The paper also analyses the implications of seasonality for the overall use of labour, forms of labour hiring and the role of non-agricultural activities.

The paper analyses the impact of the steep rise in oil prices that has taken place since 1973 on the terms of trade, balance of trade and the capacity to pay for imports out of export receipts of Bangladesh. It shows that the country would have faced a deteriorating terms of trade even in the absence of such a rise in oil prices, but this phenomenon has made things much worse for her. Not only her terms of trade deteriorated severely, her major exports suffered a setback and the reduced capacity to pay for imports led to a shrinking of the volume of crucial imports. The additional cost of imports due to higher oil prices was also quite substantial in relation to the country’s GDP, its growth and exports. Thus the rise in oil prices seems to have made substantial contributions to the country’s impoverishment during the seventies.

The present paper argues that though foreign resources play an important part in initiating and sustaining development, their importance has been over-stressed in the so-called two-gap models of foreign aid, as expounded by Chenery and Strout, Mckinnon, and others. In this paper it is shown that by designing appropriate policies on the domestic front, the critical importance of foreign resources can be relaxed to a significant extent. In particular, the present paper emphasizes the role of wage policy and the need for human resource mobilization for a labour-surplus economy. The paper also sketches out the paths of dual gaps for a labour-surplus economy and shows that policies ensuring appropriate wage growth can affect both types of gaps to a significant degree.

On the Structure of Input and Product Markets in Cotton Weaving Industry ofBangladesh : A Case Study Using Firm Level DataBy Nuimuddin Chowdhury

This paper formulates and, to an extent, practises an extended empirical framework for meaningfully examining certain structural aspects of input and product markets in cotton weaving industry of Bangladesh, using firm-level data. The study finds, inter alia, that input markets are imperfect with significant price variations arrayed against small-scale producers, but that the presence of merchants who seek to maintain the status quo leads to a partial neutralisation of the adverse price variation effects. The study further finds the cloth market to be product-differentiated.

The Effects of Crises on Differential Mortality by Sex in BangladeshBy Ray Langsten

Male mortality is known to be lower than female mortality in South Asia in the normal times. But it has also been observed that during the crisis periods, this ordering is reversed. The experience of the 1974 famine of Bangladesh, as analysed in this study, confirms this reversal of relative mortality rates. But the usual explanations offered for this reversal are not borne out by the data pertaining to Bangladesh. Several other alternative explanations are explored, but cannot be confirmed due to the lack of appropriate data.

The Bangladesh Development StudiesVolume IX, Monsoon 1981, Number 3

Is There a ‘Draught Power Constraint’ on Bangladesh AgricultureBy Gerard J. Gill

The present paper attempts to find out whether draught power is in fact a binding constraint on raising farm output to levels indicated in the Second Five Year Plan of Bangladesh. It also addresses itself to the question of the most appropriate way of relieving such a constraint if it exists. Information was collected from 360 farmers from five agro-ecologically distinct Zones of Bangladesh, who were interviewed weekly over a period of 17 months. The study demonstrates that the supply of draught power is indeed inadequate, in quality rather than quantity, and that it is distributed unevenly, so that the constraint is severe for poorer farmers, Tractorization is not found to be an appropriate solution. Rather, better feeding of the cattle, more efficient use of existing supply by improving implements and yoking systems, and minimum tillage techniques should be encouraged.

A Macro-Econometric Model of BangladeshBy M. Ali Rashid

A short-run macro-econometric model for Bangladesh has been developed in this paper combining the elements of both demand-based and supply-bottleneck models. The parameter estimates have been derived using data for the period 1960-1979 (excluding 1971). Tests of significance of the estimated co-efficients seem to validate the model. Historical simulation also revealed that the model is capable of broadly explaining the workings of the Bangladesh economy. Since no policy simulation was carried out, no definitive conclusions can be reached at this stage about the policy implications of the model. Nevertheless, some tentative conclusions have been drawn on the basis of the signs and magnitudes of estimated co-efficients.

This paper has, as its opening premise, the proposition that any efficiency–comparative exercise relating to techniques coexisting in Bangladesh with varying mechanisation must explicitly seek to isolate technical efficiency from the price and allocation effects of social discrimination that handicap the cottage and small-scale producers. It then closely examines the nature of entrepreneurial acquisition of scarce resources so as to have a basis for isolating the market-structural versus the technical influences on observed relative efficiency. The study finds that the sample mills, who only have a modest edge over the smaller enterprises in cloth-output per loom in operation, have, due to their elaborate fixed assets, much higher comparative capital–net output ratio. The handloom units outclass the mills in the productivity of recurrent imported input, as also record much higher rates of surplus on the capital employed. The handloom method was found to remain markedly superior to the mill-method even after the effects of important imperfections of factor and product markets were accounted for.

Population Pressure and Agricultural Productivity in BangladeshBy Rafiqul Huda Chaudhury

An attempt is made in this paper to understand the dynamics of the relationship between population pressure and agricultural productivity examining the change in the level of land-man ratio with the change in the level of land yield of the districts in Bangladesh during the period 1961-64 to 1974-77. It is hypothesized that land-man ratio will be inversely related to agricultural yield. The hypothesis is supported by data. However, this relationship becomes weak when districts are classified according to their yield levels. But the growth of labour force seems to be related with the growth of output, indicating a dynamic relationship between yield and population pressure. However, the direction of causation is not necessarily from ‘population pressure’ to higher productivity; rather higher productivity also leads to higher density by attracting migrants from other non-developing areas. This movement of population from poor agricultural districts to districts of better agricultural performance has resulted in higher population density in high growth rate districts and lower density in low and negative growth rate districts.

The Bangladesh Development StudiesVolume IX, Autumn 1981, Number 4

Simulation of an Econometric Model to Analyze the Impact of a Buffer Stock Scheme in the Bangladesh Jute SectorBy Sultan Hafeez Rahman

This paper is an investigation of the effects of a buffer stocks-supported price stabilization scheme on the Bangladesh jute sector. An econometric model of the Bangladesh jute sector is used for controlled policy experiments. A first order stochastic process is used to generate empirical probability distributions of the endogenous variables. A complete price stabilization policy, in which farm price is contained within a 7.5% band around the expected price is simulated. It is found that a substantial reduction in price instability can be achieved. While the estimated cost of the scheme is reasonable, the 95% confidence intervals are very large. The results of the simulations are also found to be highly sensitive to the assumed value of the export price elasticity.

Choice of Techniques in Small Scale Irrigation in BangladeshBy Md. Belayet Hossain

The study is an attempt to examine the relative efficiency of indigenous labour intensive devices vis-a-vis imported mechanized techniques regarding small scale irrigation in Bangladesh. Three indices, viz., the cost effectiveness criterion, the benefit-cost (B/C) ratio and the internal rate of return (IRR) have been used; each index has been estimated both at market prices and at shadow prices. Heavy subsidy on the mechanized techniques makes them cost advantageous over the indigenous devices. But the financial cost estimation without subsidy as well as the economic cost estimation shows the reverse situation. All irrigation devices are found to be quite desirable and worthy, as reflected by the B/C ratio. However, the indigenous devices seem to be more profitable than the mechanized techniques to an individual as well as to the society. Government objectives in terms of increasing irrigation coverage, the expansion of employment opportunity and the reduction of income inequality can, to a great extent be facilitated through the reduction/removal of subsidy from the mechanized techniques.

An Enquiry into the Nature and Determinants of Polarisation in PersonalWealth : A Case Study Using Handloom Industry DataBy Nuimuddin Chowdhury

It is usually recognised that one of the important determinants of the inequality of the distribution of incomes relates to the distribution of wealth. Not much systematic work appears to have been done about the level and determinants of transactions in wealth in Bangladesh agriculture. This paper seeks to fill this lacuna, in part, and focusses on the levels, structure and determinants of the flows of wealth in relation to a sample of handloom entrepreneurs. We argue (a) that wealth transactions by respondents who are selling in net terms represent attempts not so much optimise wealth portfolio as to tide over liquidity contingencies stemming from an unforeseen depression in current incomes; (b) that net sales and net purchases of wealth items are largely accounted for by the handloom respondents in the small and large size-classes, respectively; (c) that land and homestead account for the major proportion of the sales and purchases of assets; and (d) finally that favourable access to liquidity, represented by whether one has a running credit limit with a commercial bank, and one’s situation on the informational network, as represented by whether one happens to be a dealer in yarn as well as a manufacturer of cloth explain a considerable proportion of the observed variance. The income variable, whenever it was tried, was found to be less effective than either of these dichotomous variables in explaining the variance. The moral seems to be that access to information and sizeable liquidity represent a combination more potent, from the viewpoint of making feasible attractive purchases of assets, than merely one’s own high income.

The paper examines the labour force of the informal sector in Dhaka with respect to earnings, ability to save and invest, and attitudes and motivations. The findings indicate that involvement in informal activities is perceived as a means of altering the personal fortunes of people from a poor economic background. This is illustrated by the overwhelming preference of those self-employed in the sector to continue in current or similar activity within the sector. That such responses are based on genuine economic considerations is supported by the data on income which compare favourably with income of comparable groups in both urban and rural areas. It is not merely the current level of income that offers hope to the participants; prospects for the future also are perceived as good. This does not seem to be delusionary since there is evidence of occupational mobility within the sector. Overall, our results confirm that informal activities may be classified into two distinct groups; (1) those which lead to some accumulation of capital and (2) those leading only to a marginal living. The latter group comprises of about one-quarter of the self-employed and more than one-third of the employees. In contrast, upwards of one-third of the self-employed show significant economic potential. In general, the informal sector opens up some ways for self-improvement and breaking out of poverty to the disadvantaged of the urban labour force.

Several alternative estimates are made of the flow of remittances sent by the Bangladesh workers in the Middle East and the conclusion is reached that most of the potential remittance is actually sent through the official channel. Some of the impacts of these remittances on the Bangladesh economy are also analysed. The main focus is on the impact on balance of payments on the one hand and he income and savings of the remittance receiving households on the other. In connection with the balance of payments impact, attention is drawn to the possible ‘distortion costs’ that may be involved in stimulating increased flow of remittances, given the structure of the foreign exchange market in Bangladesh. The absolute impact on the income and savings of the remittance-receivers is found to be substantial; but the impact on the relative distribution of income seems disconcerting.

The standard two-sector model of trade has been modified to explore the consequences of removing its static framework. It has been shown that the reallocation effects consequent upon a change in terms of trade ( or consequent upon the opening of trade) may lead to capital decumulation in the economy and, paradoxically, to an expansion of trade varying with the rate of capital decumulation. Thus trade expansion may be accompanied by economic atrophy. This analysis may be used to understand the economic conditions in some of the colonies, viz., India in the first half of the nineteenth century. It may also be applied in reverse to explain how colonial trade became an ‘engine of growth’ in the metropolitan countries.

Theoretical models have been developed in recent years for analysing the problem of choice of technique for dualistic economies such as Bangladesh. But implications of these models have generally been explored on the basis of assumed values of parameters. This paper experiments with a variant of these models with actual values of the parameters estimated from Bangladeshi data. The model is simulated to derive implications for choice of technique at different stages of economic development. By using a social welfare function which takes note of inter-sectoral (but not intra-sectoral) equity, the model shows that at the present stage of development, greater emphasis should be laid on generating savings, even if at the cost of lower labour-intensity in the choice of investment projects. But more labour-intensive projects should be encouraged as the traditional sector gets increasingly absorbed in the modern sector.

The Bangladesh Development StudiesVolume VIII, Autumn1980, Number 4

The Peasant Economy in Transition : The Rise of the Rich Peasant in Permanently Settled BengalBy Abu Ahmed Abdullah

This paper attempts to trace the genesis and consolidation of a class of rich peasants in the districts that now constitute Bangladesh. It is argued that at least in some areas a powerful class of well-to-do peasants existed even before the British introduced the Permanent Settlement. Furthermore, far from creating a situation where a more or less homogeneous body of peasantry were helpless in the face of unchecked exploitation by the zamindars, the Permanent Settlement in fact ushered in a period of class struggle between zamindars and rich peasants, but also, and increasingly, by the partly or wholly expropriated poorer peasants. It is suggested that by and large, by the first or second decade of this century, the rich peasants had in most areas of the country wrested effective economic and political power from the zamindars. The new rural power elite, who continue to dominate the rural scene today, are rich-peasants-cum-petty-landlords who were recruited partly from the richer strata of the peasantry and partly from the ranks of intermediate tenureholders.

Farm level data as used in this paper show that farm households in Bangladesh agriculture have considerable surplus (surplus being defined as income minus consumption of ‘essential goods’) and that surplus varies positively with farm size. However, reinvestment of surplus in productive agricultural uses was found to be negatively related to farm size. Explanation this phenomenon was sought in some technical and structural constraints imposed on productive use of surplus. One particular argument that rural credit market diverts capital away from productive uses was not found to be sufficiently convincing. The evidence on the contrary seems to vindicate Schultz’s argument that investment is a function of profitable investment opportunities.

Unemployment of the graduates is becoming a serious problem in Bangladesh. And the problem cannot be dismissed as a mere job-search Phenomenon. Analysis in this paper indicates that the phenomenon can be explained by the simultaneous operation of forces acting from both the demand and supply sides and a less than perfect operation of the labour market for graduates. Employability appears to be an important factor affecting the demand for graduates as there is support for the existence of a systematic relationship between the incidence of unemployment and the relevance of education for the jobs available. Thus a kind of structural imbalance does seem to exist in the labour market for graduates. The problem is further aggravated by the type of expectations that is generated amongst the graduates by the content of curricula, environment of the educational institutions, the incentive structure in the labour market and the whole system in general. The ultimate result is a mass production of graduates, a large number of whom are not wanted by the labour market.

Volume 7

The Bangladesh Development StudiesVolume VII, Winter 1979, Number 1

Inter-country Comparison of Public Enterprise Performance : AnApplication to the Cement Industry of South AsiaBy W.D. Lakshman

The main objective of the paper is to develop a methodology for evaluating the comparative performance of public sector industries producing the same commodity, but operating in different socio-economic environments. However, a dully satisfactory methodology could not be developed as it had to be adjusted to the contents of available data which were collected prior to the formulation of any such methodology. What the paper, therefore, attempts to do is to indicate the essential ingredients of an appropriate methodology. These are applied on the data on the cement industry in three countries–Bangladesh, India and Sri Lanka–collected in the course of an IDRC Project on public enterprise performance. Value-added per unit of resource use has been used as the main criterion of comparing their performance.

Rural Development and Family Planning Behaviour in Bangladesh VillagesBy Mohammad Alauddin

The purpose of the study is to examine the variation in knowledge and usage of contraceptive methods across Bangladesh villages. The main hypothesis is that the variation can be explained by three sets of factors measured at the village-level : development programmes, family planning programme efforts, and given environmental and socio-economic conditions. Data are drawn from the Bangladesh Fertility Survey and the 1974 Bangladesh Population Census. The three sets of factors taken together explain a greater proportion of the variance in knowledge and usage of contraceptive methods than each of the sets taken singly or in paired combination. Knowledge of clinical contraceptive methods is found to be affected more by development programmes than by either family planning or environmental and socio-economic conditions. Knowledge of non-clinical contraceptive methods, on the other hand, is affected more by given environmental and socio-economic conditions. While both development and family planning variables have independent and approximately equal effects on ever use of contraception, each of them separately is not likely to produce as much contraceptive usage as would both of them jointly. The policy implication of this finding is that if both development and family planning programmes are provided to the villages, the impact on fertility may be maximized.

This paper attempts to estimate the foodgrains demand elasticities of rural households in Bangladesh by using pooled cross-section data from several rounds of a family budget survey known in short as the QSCEC. The estimated elasticities are income-class-specific and are based on a demand-theoretic specification of the own-price, cross-price and income elasticities of consumer demand. The estimation of these elasticities can be useful in analysing the effects of changes in foodgrains prices on defferent economic groups and in devising a sound food policy. The statistical results are of particular interest for testing some standard hypotheses regarding consumers’ behaviour at extremely low levels of living such as obtain in rural Bangladesh.

This article first examines theoretically some of the Marxist and neo-Marxist arguments on the role of rural credit market and usury capital in perpetuating stagnation in backward agriculture. The data collected through surveys in two areas of Bangladesh also enable it to examine empirically some of the more recent models. It is argued in the article that the models provide only a partial analysis of the observed credit relations in Bangladesh agriculture. For a coherent and complete analysis, the totality of credit and land relations must be considered and the significant observation that a large part of loans in rural Bangladesh is provided free of interest must be put in proper perspective. The article provides an alternative analysis of rural credit relations and draws some implications for capital formation and capitalist growth in Bangladesh agriculture.

An attempt is made in this paper to analyse the structure of unemployment and underemployment in Bangladesh agriculture on the basis of a micro study. In particular, the study tries to relate the degree of underutilisation of labour with farm size on the one hand and tenurial status on the other. In view of extreme periodicity in agricultural activities, the degree of unemployment is estimated with reference to three-time periodswhole year, busiest season and busiest period. Defining withdrawable surplus of labour as the level of unemployment in the busiest period, it appears that roughly 20 per cent of the labour force can be withdrawn without adversely affecting the level of output, although only about 6 per cent of the labour force is employed throughout the year. As for the structure of unemployment, it is revealed that the employment status of the share-croppers is significantly better than that of the owner operators, and that the largest farm size class shelters the highest proportion of surplus labour for the whole year.

Changes in the trade balance of Bangladesh are analysed in this paper with the help of a theoretical framework which helps to decompose the change into price and quantity effects. The analysis is conducted in two parts pertaining to the two periods 1959/60 to 1968/69 and 1972/73 to 1974/75. It is shown that trade balance suffered adverse movement in both periods : however, in the earlier period favourable price effect substantially reduced the impact of adverse quantity changes, whereas in the latter period both price and quantity effects were unfavourable and they reinforced each other in creating adverse balance of trade.

Revolutionary central leaderships usually desire agrarian transformation from individual to collective agriculture from out of macro perceptions not initially shared by the peasantry. This paper seeks to understand, from a comparative study of experiences in North Viet Nam, Tanzania and Ethiopia, what are the possibilities and policy issues for achieving peasant participation in such transformation. The study suggests that there must be evident material compulsion for the peasantry to voluntarily adopt collectivism. But this is not enough. Natural inclination of the peasantry under such circumstances towards co-operation in production may be destroyed by an attempt to force the pace of transition to collectivism. What is needed is a careful strategy of steering the peasantry through progressive praxis in collective agriculture, in which co-operation in production develops organically as a productive force in terms both of peasant motivation and their capability for managing the complex collective tasks. There is thus an evolutionary stream in participatory transition to collective agriculture. This at any stage should be more advanced the earlier it starts, and it is never too early to begin, even before a macro-political change takes place.

Adoption of HYV Rice in BangladeshBy M. Asaduzzaman

The present study analyses the problem of adoption of high yielding varieties of rice during the rainfed aman season in Bangladesh. Drawing on information from a village survey, the analysis confirms some of the well-known results (for an incomplete diffusion process) regarding effects of farm size and tenurial status on the decision to adopt and the extent of adoption. In an attempt to probe further the causal relationships behind adoption the analysis was extended to consider characteristics of farm households. Two variables reflecting consumption requirements and family labour availability relative to land were found to contribute significantly to the explanation of variation in adoption and its extent across farm sizes.

The paper identifies some of the demographic, background and socio-economic characteristics of women that affect cumulative fertility and examines the magnitude of differentials in cumulative fertility due to these factors using data from the Bangladesh Fertility Survey. Multivariate techniques are adopted in the analysis to understand the net effect of each of the factors. The results indicate the predominance of demographic variables such as age, age at first marriage and number of times married over other types of variables in the determination of fertility behaviour in rural Bangladesh. However, some of the background and socio-economic variables such as religion, wife’s work status and husband’s occupation turn out to be significant predictors of fertility behaviour for older women. There is also some indirect evidence to suggest the presence of some kind of involuntary control on fertility behaviour through such mechanism as prolonged breastfeeding, in fecundity or sub-fecundity, pregnancy wastage etc. among various sub-groups of the population which are suffering from an extremely poor standard of living.

The Defectiveness of the 1974 Population Census of BangladeshBy Sharifa Begum and Armindo Miranda

This paper critically evaluates the plausibility and consistency of various findings of the 1974 Census of Bangladesh. However, the objective of the paper is not merely to reveal the defects per se. It purports to show how the methodology of research on various issues relating to population statistics can be significantly affected by the interpretation one gives to the data discrepancies and by the manner in which one attemp’s to correct those discrepancies. This is done as a part of a larger study which aims at analysing the mechanisms through which research, policy making and administration adjust to and thrive on poor quality of statistical data.

The Bangladesh Development StudiesVolume VII, Autumn 1979, Number 4

An Econometric Model Simulation of the world Jute MarketBy Mustafa K. Mujeri

This paper is concerned with the empirical analysis of the international market for raw jute and jute manufactures. A dynamic disaggregated model is developed and estimated, and found satisfactory. The model is then used in simulation experiments to assess the impact, on both producing and consuming regions, of possible international agreements regarding the price of jute. It has been found that such agreements would typically have only limited benefits for the producing nations, as a result of the high and increasing elasticity of substitution between jute and synthetic substitutes.

The foreign trade regime of Bangladesh is characterised by fixed exchange rate, a reliance on both tariff and quota for limiting imports and ad hoc export incentive measures. It is often hypothesised that this kind of policy syndrome creates a distorted structure of incentives leading to a pattern of industrial growth which does not conform to comparative advantage. This paper attempts to test the validity of the hypothesis in the context of Bangladesh. Empirical measurement of comparative advantage in this study is based on Domestic Resource Cost (DRC). A sector is considered to enjoy comparative advantage if its DRC is positive and less than the shadow price of foreign exchange. On the basis of a survey of 62 manufacturing sectors, it is found that the DRC turns out to be negative for as many as 18 sectors, including one important sector, cigarette. There are 19 sectors with long-run DRC values positive, but higher than the shadow price of foreign exchange indicating lack of comparative advantage. Some important sectors in this group are steel, matches and paper. Only 25 sectors demonstrate long run comparative advantage. The findings, therefore, confirm the hypothesis that the pattern of industrial growth in Bangladesh does not conform to comparative advantage.

Fertiliser Use in Two Selected Areas of BangladeshBy Md. Abul Quasem and Mahabub Hossain

The pattern of utilisation of fertilisers on farms of different sizes and tenurial categories in two villages of Bangladesh is studied in this paper. It is found that although small farmers are late adopters they are not using less fertiliser per acre compared to large farmers in comparable crops. Total fertiliser use per acre is, however, higher on large farms mainly because of differences in crop-mix, i.e., the small farmers devote a smaller proportion of the area to high-yielding crops which are fertiliser-intensive. Tenurial status of a farm is not found to have a negative impact on fertiliser use. The findings indicate that the predominance of small farms in Bangladesh, and the crop-sharing system may not act a constraint to agricultural growth through expansion of this modern input provided credit is made available to poor cultivators on favourable terms to help them adopt purchased-input-intensive crops.

This paper focuses attention on the output and employment potential of alternative trade strategies for the industrial economy of Bangladesh. The analysis involves two basic stages. At stage I, the input requirements of the various industrial sectors of the economy are estimated in an input-output framework. At stage II, the comparative factor intensities of export expansion and import substitution as calculated in the simple Leontief tradition, from which estimates the output and employment implications of trade in manufactures are then directly deduced. The findings in this study indicate that the industrial exports and import substitutes of Bangladesh do not differ significantly in their implications for (unskilled) labour employment. Export promotion, however, is likely to have a considerably higher output potential, for a given amount of investible resource, as compared to a policy of import substitution.

This paper makes an attempt to understand the causes of low capital utilization in the manufacturing industries of Bangladesh. After providing a short summary of the theories which have been advanced to explain the idleness of capital, the empirical implications of a major theoretical work by Marris is brought out in the form of some estimating equations. Of the variables included in these equations only firm size appears to have a significant impact on utilization in the case of Bangladesh. This led to a search for alternative explanations of the phenomenon of low capital utilization. Supply bottlenecks created by the shortage of key inputs like raw materials and spare parts (especially imported ones), skilled manpower, etc. are found to be quite important. The availability of raw materials and spare parts (both domestic and imported) explain nearly 77 per cent of the variation in capital utilization. It is argued that the policy of import licensing, project-bias of foreign aid, overvaluation of the currency giving rise to the practice of overinvoicing have encouraged the creation of additional idle capacity. Finally, the evidence of any relationship between utilization and the use to which the product of a particular industry is put is also weak.

This study compares three alternative ground water technologies in terms of their economic and social appropriateness for Bangladesh. A modified form of social cost-benefit analysis is applied to the three technologies : hand pump tubewells, shallow tubewells (0.5 cusec) and deep tubewells (2 cusec). The methodology is limited to costs which means that the results can be used for ranking purposes only. The calculation of standard unit costs is subject to sensitivity tests on the price for unskilled labour (pumping), the value of foreign exchange, the lifetime of capital goods and variations in command areas. The results emphasize the economic dominance of power pumping technology when labour is shadow priced at one-half or less of the current wage. The ranking of technologies is also not at all sensitive to the price of foreign exchange. The report emphasizes that attention needs to be paid to institutional-social questions as well as the technical considerations in order to avoid selecting a technology which has no potential for productivity increases.

Should Bangladesh Participate in an International BufferStocking Arrangement for Raw Jute?By Sadiq Ahmed

This paper has examined the case for Bangladesh being a party to an international buffer stocking arrangement for raw jute. The need for international buffer stock is established on the basis of two results. First, it has been found that magnitude of price and export value fluctuations are quite severe. And second, further examination has shown that supply fluctuations mainly have caused price and value fluctuation. It has also been pointed out that although buffer stock has important implications for long term viability of raw jute as a source of foreign exchange earning, it is basically a short term measure. Implementation of additional measures, involving both domestic policies and cooperation from importing countries in respect of removal of trade barriers, has to be ensured for keeping raw jute alive as a source of foreign exchange earnings for quite sometimes to come.

The Bangladesh Development StudiesVolume VI, Summer 1978, Number 2

Price Support Versus Fertilizer Subsidy for Increasing Rice Production in BangladeshBy Raisuddin Ahmed

The relative efficiency of the price support of rice compared to the fertilizer subsidy policyboth competing for scarce budgetary resourcesis evaluated in the paper. An analytical framework is developed to obtain measures of the evaluation criteria. The results indicate that the fertilizer subsidy policy is more efficient than the price support policy in increasing production. Sensitivity tests with respect to some important assumptions do not change the basic conclusions. Distributional implications also tend to favour fertilizer subsidy policy. One implication of the results is that, for any reduction in the budgetary burden of subsidy, the government should explore the price support programme before reducing fertilizer subsidy.

The apathetic attitude towards self-cultivation resulting from the social contempt for manual labour, alleged by many social scientists in South-Asia does not fully explain the existence of tenancy in Bangladesh, where a major portion of land in the tenancy market comes from resident households cultivating a part of their holding by themselves. Other factors mentioned in the literature, e.g., the level of natural risks and the wage also do not explain much of the variation in the incidence of share tenancy. This paper argues that in a monsoon dominated rice agriculture such as Bangladesh the nature of property distribution can substantially affect the existence and regional variation of tenancy, because it can influence the relative advantages of ownership cultivation with wage labour and cultivation through share tenants. The hypothesis has been tested with cross-section data at both macro and micro level.

Labour Force Analysis : Bangladesh, 1974By A.F. Md. Habibul Huq

The behavioural pattern of Bangladesh labour force is characteristically rural, agrarian, bearing distinct marks of age-sex-regional differentials: inter-censal comparisons reveal no significant rural-urban redistribution or its re-structuring among fields of economic activity during 1961-74. The expected male working life compares favourably with the pattern prevalent in selected developing countries, despite a heavier toll of mortality. Estimated statistics of male labour force dynamics reveal that 71.64% of the entries occur by age 15, death claims 55.6% of the annual depletion below age 55, whereas 53.5% of the retirements occur at age 75 and above. The estimated labour force replacement ratio implies that for every 100 depletions, 275 new entries or 175 net additions take place annually. The current back-log of un-and under employed labour force is estimated at around 9.5 million. The socio-economic-geo-demographic realities make it inevitable that vast majority of the surplus labour force will have to be productively employed within a rural set-up. Basic changes in production relations is to be brought about by building socio-economic infrastructure that will engender small family norm from work-force point of view by gainfully employing that adult working population through optimum exploitation of its productive potentials. A comprehensive policy framework for Bangladesh should incorporate the essentials of an integrated labour force and population policy taking cognizance of the inter-relationship of the economic-demographic variables that regulate the demand and supply of labour force on both quantitative and qualitative perspectives.

Insurance for Small Farmers to Encourage InnovationBy Robert W. Herdt and Michael M. Dehn

Government-sponsored innovation insurance could be used as a policy to offset possible undesirable income distribution effects associated with a fertilizer-intensive high yielding-variety strategy for agricultural development. Unequal income distributions are intensified if wealthy farmers accept profitable innovations while poor farmers do not, and such adoption patterns have been observed in some areas around the world. It has been suggested that one cause of this is the unwillingness and inability of poorer farmers to bear the risks associated with innovation. Crop insurance plans have been suggested as a measure to offset these risks. The mechanics of such a plan along with a method for basing insurance premiums on a limited amount of experimental data are discussed in this paper.

The Bangladesh Development StudiesVolume VI, Monsoon 1978, Number 3

Shadow Pricing and Wage and Employment Issues in National Economic PlanningBy Deepak Lal

This article shows how the recently refined theory and practice of shadow pricing is relevant in devising appropriate policies for meeting the recent concerns with poverty redressal and employment generation. It also demonstrates how the problems of employment and employment generation. It also demonstrates how the problems of employment and equity are related in a series of models where public policy is subject to an increasing number of political and structural constraints. It distinguishes between the long-run perspective planning problem in which the employment problem is manifested as the choice of the optimal growth rate for the economy, and short-run policy problems of dealing with various disequilibria and distortions which force the economy inside the constrained feasibility frontier, and for whose amelioration policies based on estimates of various shadow wage rates are shown to be crucial. Pitfalls in Partial Adoption of the McKinnon-Shaw Development Strategy :The Nepalese ExperienceBy Maxwell J. Fry

Nepal embarked upon a programme of financial development, including interest rate liberalisation and reform in 1974. The aims were explicitly to increase domestic saving, investment and the efficiency of investment. This paper analyses the effects of the interest rate reform. Short-run effects have included a change in the composition of money, a substantial fall in velocity of circulation and capital inflow from India. The overall effect has been mildly expansionary. However, saving and investment have not responded. Other government policies strongly deter investment. Yet, a buoyant demand for investible funds is a prerequisite for successful interest rate reform. The necessity of simultaneous liberalisation and reform of government taxation, price, foreign trade and finance policies to raise the rate of economic growth is borne out in the case of Nepal.

This paper deals with oral contraceptors, their socio-demographic status the reasons as to why they accepted oral contraceptive, and the pattern of use. The data employed were obtained from a multi-sectoral rural project (in Sulla) undertaken by the Bangladesh Rural Advancement Committee. The “single decrement life table approach” has been used to assess the duration and pattern of use among the participants. Comulative continuation rates for all acceptors were found to be higher in Sulla than other observers have found elsewhere in the country. This is attributed to specific characteristics of the users as well as other programmes being carried out in the area. Classifying contraceptors by reasons for contraceptive use provides results which may be helpful to policy makers.

The Bangkok Agreement : An Evaluation of its Implications in Trade Liberalisation in AsiaBy I.N. Mukherjee

The Bangkok agreement, signed under the auspices of the United Nations Economic Commission for Asia and the Pacific (ESCAP), is Asia’s first multilateral trade liberalisation effort leading to the establishment of a preferential trading arrangement in the region. After tracing the roots of cooperation in trade culminating in the signing of the Agreement, this paper examines the possible distribution of benefits among the member countries. Using alternative criteria to measure the exchange of benefits, it is contended that its implementation, in its present form, is likely to lead to imbalances, particularly between the relatively developed and the less developed member countries. Accordingly some policy guidelines are suggested with a view to moderating the imbalances.

The Bangladesh Development StudiesVolume VI, Autumn 1978, Number 4

Formulating A Viable Land Policy for Bangladesh — WhatDo We Need to KnowBy Abu Abdullah

This paper attempts three things. First, it tries to put the discussion of land reform policies in its proper context by relating it to the existing agrarian structure. Secondly, it presents a critique of too-facile generalisations about the supposed benefits of certain recommended policies. Thirdly, it broaches a discussion of the political preconditions and consequences of these policies. The first three sections develop the argument that the dominant mode of production in Bangladesh agriculture is a petty peasant mode of production, whose working are modified in important ways but not yet qualitatively transformed by the dominance at a higher level of the world capitalist system. It is the fragmented nature of peasant property, rather than rent, usury capital, or merchant capital, that constitutes the main internal barrier to growth. It is argued that while policies like abolition of Sharecropping and ceiling legislation may be politically essential as a transitional programme, they cannot provide in themselves a solution to the agrarian problem. Finally the paper tries to evaluate the political feasibility of the various policies discussed, given the existing class structure and the class nature of the state, and concludes on what may be called a guardedly pessimistic note.

The paper attempts to analyse the course of development in the manufacturing sector of Bangladesh over the past three decades. Two distinct time periods, viz, pre-liberation and post-liberation periods, are distinguished for the purpose of analysis. The paper identifies the basic philosophies behind the industrialisation strategies in the two periods and analyses the manner in which actual policies pursued have been shaped by these philosophies as well as the impact of these policies on the achievements and failures of this sector. Some policy suggestions are made with respect to certain major weaknesses of this sector being felt at present. The paper concludes with some observations on the kind of general socio-political changes that would be required in order to develop a viable manufacturing sector which will also be best equipped to serve the interests of the common people.

On the Normative Measurement of InequalityBy S. R. Osmani

Recent attempts at devising normative measures of inequality are critically examined in this paper. It is argued that some of the well-known measures are operationally irrelevant in comparing inequality between situation involving unequal total incomes. In addition, a new approach is suggested for comparison of inequality in the face of both unequal total incomes and different price structures. The framework of ‘constant price comparison of named goods vectors’ which has recently been employed for real national income comparison, is used for this purpose. The operational relevance of the new approach is also critically examined.

The Functional Form of the Demand for Money in BangladeshBy G.V.S.N. Murty and Sukumari Murty

A generalised money demand function (GMDF), based on Box-Cox parametric transformations, has been estimated for Bangladesh. This generalised form reduces to the liner, semi-log and log-linear forms, under certain restrictions. By incorporating different transformations, and by considering equilibrium and disequilibrium versions, the estimates of the generalised money demand function have been compared with those obtained from the restrictive models. A log-likelihood test has been carried out for choosing an appropriate functional form. Our results indicate that the linear form is appropriate for the equilibrium version of the money demand function, while in the disequilibrium version, none of the restricted models seems to be appropriate. The behavioural properties of the alternative models have been examined by considering the movement of income and interest rate elasticities in the sample period. The empirical performance of alternative models in terms of their predictive ability has also been examined. Theil’s U-statistic constructed for this purpose revealed the superiority of estimating the generalised money demand function.

Volume 5

*The Bangladesh Development StudiesVolume V, January 1977, Number 1

*The Bangladesh Development StudiesVolume V, April 1977, Number 2

*The Bangladesh Development StudiesVolume V, July 1977, Number 3

*The Bangladesh Development StudiesVolume V, October 1977, Number 4

Volume 3 & Volume 4

*The Bangladesh Development StudiesVolume IV, January 1976, Number 1

*The Bangladesh Development StudiesVolume IV, April 1976, Number 2

*The Bangladesh Development StudiesVolume IV, July 1976, Number 3

*The Bangladesh Development StudiesVolume IV, October 1976, Number 4*The Bangladesh Development StudiesVolume III, January 1975, Number 1

*The Bangladesh Development StudiesVolume III, April 1975, Number 2

*The Bangladesh Development StudiesVolume III, July 1975, Number 3

*The Bangladesh Development StudiesVolume III, October 1975, Number 4

Abstract01

*The Bangladesh Development StudiesVolume II, January 1974, Number 1

*The Bangladesh Development StudiesVolume II, April 1974, Number 2

*The Bangladesh Development StudiesVolume II, July 1974, Number 3

The Bangladesh Development StudiesVolume II, October 1974, Number 4

Brief Reflections on the Central Issues of Policy in BangladeshBy Gustav Ranis

It is assumed that the reader is familiar with the general features of the Bangladesh economy. Let me only add, for openers, that while recognizing the deep difficulties currently besetting the system—including the recent severe floods— I do not share the general sense of despondency, if not despair, concerning the prospects for the future. There are enough things, I am firmly convinced, within the control of the decision-makers of Bangladesh to convert present stagnation into satisfactory—though by no means spectacular—forward motion.

Neither of the objectives, maximum output and maximum employment, are unambiguous. The output objective is ambiguous because output at any time consists of a heterogeneous collection of goods. Types of employment, in duration—daily, weekly, and seasonally—in effort and by regions, etc., also differ. In addition, both output and employment occur over time. Current levels of output and employment may influence future levels. Weighting therefore both intra- and inter-temporally is crucial to the definition of the objectives. However, we shall begin by ignoring these ambiguities and assume that our sole concern is with current levels of output and employment, and that maximizing current levels automatically leads to achievement of future objectives, or put more formally, that maximizing current levels of output and employment is equivalent to maximizing the present value of the entire streams of output and employment over time. We shall also begin by assuming that there is a single index for output and one for employment.

*The Bangladesh Development StudiesVolume I, April 1973, Number 2

The Bangladesh Development StudiesVolume I, July 1973, Number 3

Opportunity For Village Development : The Tanks of BangladeshBy Douglas V. Smith

The new government of Bangladesh is faced with enormous problems of mobilizing a growing population and of allocating resources to achieve lasting and equitable improvements in social welfare. Land now occupied by tanks is currently neglected by economic planners; we argue that a tank development scheme accompanied by land reforms and establishment of marketing cooperatives can complement other land and water development programs and contribute to productivity increases with favourable distributional, nutritional, and ecological properties. In general, it will be maintained that the approach used to evaluate the potential of the tanks of Bangladesh, an approach based upon a view of their role as components in a system of economic, sociological, and ecologic relations, is essential to the further development of technological alternatives that can contribute to equitable, self-sustaining social development.